Johnson Company manufactures and sells different colors of dry erase markers. Results from last year from the sale of green markers is given below: Sales revenue (79,000 units @ $4 each) Variable costs Contribution margin Fixed costs: Salaries of line supervisors Advertising expense Allocated general overhead Net loss $316,000 $237,000 $ 79,000 $ 43,000 $ 28,000 $ 19,000 $<11,000> Johnson Company is considering eliminating the green dry erase markers product line The company has determined that if the

Johnson Company manufactures and sells different colors of dry erase markers. Results from last year from the sale of green markers is given below: Sales revenue (79,000 units @ $4 each) Variable costs Contribution margin Fixed costs: Salaries of line supervisors Advertising expense Allocated general overhead Net loss $316,000 $237,000 $ 79,000 $ 43,000 $ 28,000 $ 19,000 $<11,000> Johnson Company is considering eliminating the green dry erase markers product line The company has determined that if the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Memofax Inc. produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below. Sales (12,600 units at $40 per unit $504,000 Variable expenses Contribution margin Fixed expenses 302,400 201,600 Net operating loss 225,600 $(24,000) The sales manager feels that a $7,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $73,000 increase in monthly sales. If the sales manager is right, what will the revised net operating income or loss?
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Top managers of Video Avenue are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepared the following analysis to helo make this decision: Total fixed costs will not change if the company stops selling DVDs. Video Avenue Income Statment For the Year Ended December 31, 2018 Total Blue-ray DVE Discs Net Sale Revenue $ 437,000 $ 308,000 $ 129,000 Variable Costs 250,000 154,000 96,000 Contribution Margin 187,000 154,000 33,000 Fixed Cost Manufacturing 132,000 76,000 56,000 Selling and Administrative 65,000 51,000 14,000 Total Fixed Expenses 197,000 127,000 70,000 Operating Income(Loss)…
Choose the product that will have the largest loss if sales greatly decrease. Letter Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs for each product follow.
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Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Incorporated, has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (13,200 units × $20 per unit) $ 264,000 Variable expenses 132,000 Contribution margin 132,000 Fixed expenses 147,000 Net operating loss $ (15,000) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,800 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $86,000 per month. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income? 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $31,000 in the…