Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales (9,600 units at $225 each) $ 2,160,000 Variable costs (9,600 units at $180 each) 1,728,000 Contribution margin $ 432,000 Fixed costs 324,000 Income $ 108,000 1. Compute the company’s degree of operating leverage. 2. If sales decrease by 5% in the next year, what will be the company’s income? 3. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Hudson Company reports the following contribution margin income statement.
| HUDSON COMPANY | |
| Contribution Margin Income Statement | |
| For Year Ended December 31 | |
| Sales (9,600 units at $225 each) | $ 2,160,000 |
|---|---|
| Variable costs (9,600 units at $180 each) | 1,728,000 |
| Contribution margin | $ 432,000 |
| Fixed costs | 324,000 |
| Income | $ 108,000 |
1. Compute the company’s degree of operating leverage.
2. If sales decrease by 5% in the next year, what will be the company’s income?
3. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
