Morton Company's contribution format income statement for last month is given below. Sales (46,809 units × $21 per unit) Variable expenses Contribution nargin Fixed expenses $ 96,000 676, 200 289, 890 231,840 Net operating income $ 57,960 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.
Morton Company's contribution format income statement for last month is given below. Sales (46,809 units × $21 per unit) Variable expenses Contribution nargin Fixed expenses $ 96,000 676, 200 289, 890 231,840 Net operating income $ 57,960 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
Problem 27E: Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the...
Related questions
Question
![Required 1
Required 2 Required 3 Required 4
Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree
of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety
percentage. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (l.e. .1234 should
be entered as 12.34).)
Present
Proposed
a. Degree of operating leverage
b. Break-even point in dollar sales
c. Margin of safety in dollars
Margin of safety in percentage
Required 1
Required 2 Required 3 Required 4
Refer again to the data in (1). As a manager, what factor would be paramount in your mind in deciding whether to purchase
the new equipment? (Assume that enough funds are available to make the purchase.)
Ocyclical movements in the economy
OReserves and surplus of the company
OPerformanoce of peers in the industry
OStock level maintained
Required 1
Roquirad 2 Roquirad 3 Roaquired 4
Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's
marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses,
the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims
this new approach would increase unit sales by 30% without any change in selling price; the company's new monthly fixed
expenses would be $495,558; and its net operating income would increase by 20%. Compute the company's break-even point
in dollar sales under the new marketing strategy, (Do not round intermediate calculations. Round your answer to the nearest
whole dollar amount.)
Show less A
New break even point in dolar ales](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0dcc51e9-e947-4215-91cf-9c9e09d6c1cf%2F8e258ac8-3c1a-4404-bb68-e76beef782d0%2Fe0dt6im_processed.png&w=3840&q=75)
Transcribed Image Text:Required 1
Required 2 Required 3 Required 4
Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree
of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety
percentage. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (l.e. .1234 should
be entered as 12.34).)
Present
Proposed
a. Degree of operating leverage
b. Break-even point in dollar sales
c. Margin of safety in dollars
Margin of safety in percentage
Required 1
Required 2 Required 3 Required 4
Refer again to the data in (1). As a manager, what factor would be paramount in your mind in deciding whether to purchase
the new equipment? (Assume that enough funds are available to make the purchase.)
Ocyclical movements in the economy
OReserves and surplus of the company
OPerformanoce of peers in the industry
OStock level maintained
Required 1
Roquirad 2 Roquirad 3 Roaquired 4
Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's
marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses,
the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims
this new approach would increase unit sales by 30% without any change in selling price; the company's new monthly fixed
expenses would be $495,558; and its net operating income would increase by 20%. Compute the company's break-even point
in dollar sales under the new marketing strategy, (Do not round intermediate calculations. Round your answer to the nearest
whole dollar amount.)
Show less A
New break even point in dolar ales
![Morton Company's contribution format income statement for last month is given below.
Sales (46,000 units x $21 per unit)
Variable expenses
Contribution margin
Fixed expenses
$ 966,000
676, 200
289, 890
231, 840
Net operating incone
$ 57,960
The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary
considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is
studying ways of improving profits.
Complete this question by entering your answers in the tabs below.
Requlred 1 Requlred 2 Required 3 Required 4
New equipment has come onto the market that would alow Morton Company to automate a portion of ts operations. Varible expenses would be reduced by
$6.30 per unt. Hovever fived expenses would increase to a ota of $2,64 each month. Preare two contributon format income statements, one showing
present operations and one showing how operations would appear i the new equipment is purchased. (Round "Per Unt" to 2 decimal places,.)
Show less a
Morton Company
Contribution Income Statement
Present
Proposed
Amount
Per Unit
%
Amount
Per Unit
%
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0dcc51e9-e947-4215-91cf-9c9e09d6c1cf%2F8e258ac8-3c1a-4404-bb68-e76beef782d0%2F3fma47_processed.png&w=3840&q=75)
Transcribed Image Text:Morton Company's contribution format income statement for last month is given below.
Sales (46,000 units x $21 per unit)
Variable expenses
Contribution margin
Fixed expenses
$ 966,000
676, 200
289, 890
231, 840
Net operating incone
$ 57,960
The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary
considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is
studying ways of improving profits.
Complete this question by entering your answers in the tabs below.
Requlred 1 Requlred 2 Required 3 Required 4
New equipment has come onto the market that would alow Morton Company to automate a portion of ts operations. Varible expenses would be reduced by
$6.30 per unt. Hovever fived expenses would increase to a ota of $2,64 each month. Preare two contributon format income statements, one showing
present operations and one showing how operations would appear i the new equipment is purchased. (Round "Per Unt" to 2 decimal places,.)
Show less a
Morton Company
Contribution Income Statement
Present
Proposed
Amount
Per Unit
%
Amount
Per Unit
%
%
%
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