OProblem Set: Module 41. EX.06.012. PR.06.02A ALGO3. BE.06.02.ALGO4. BE.06.03.ALGOcengagenow.com●Portmann Company, operating at full capacity, sold 1,000,000units at a price of $188 per unit during the current year. Itsincome statement is as follows:SalesCost of goods soldGross profitExpenses:Selling expensesAdministrative expensesTotal expensesCost of goods soldSelling expensesAdministrative expensesTotal variable costsTotal fixed costs$16,000,00010,600,000Operating incomeThe division of costs between variable and fixed is as follows:FixedUnit variable costUnit contribution margin+ 40Variable70%75%50%$188,000,000(101,000,000)$87,000,000(26,600,000)$60,400,000Management is considering a plant expansion program for thefollowing year that will permit an increase of $11,280,000 inyearly sales. The expansion will increase fixed costs by$5,000,000 but will not affect the relationship between salesand variable costs.Required:1. Determine the total variable costs and the total fixed costsfor the current year.units30%25%50%2. Determine (a) the unit variable cost and (b) the unitcontribution margin for the current year.3. Compute the break-even sales (units) for the current year.units4. Compute the break-even sales (units) under the proposedprogram for the following year.units5. Determine the amount of sales (units) that would benecessary under the proposed program to realize the$60,400,000 of operating income that was earned in thecurrent year.6. Determine the maximum operating income possible withthe expanded plant.7. If the proposal is accepted and sales remain at the currentlevel, what will the operating income or loss be for thefollowing year?СО

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Answered: Portmann Company, operating at full…

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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A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year: Sales $235,100 Cost of goods sold 112,000 Gross profit $123,100 Operating expenses 145,000 Loss from operations $(21,900) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether to Continue King Cola (Alternative 1) or Discontinue King Cola (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential AnalysisContinue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2)March 3 Continue KingCola (Alternative 1) Discontinue KingCola (Alternative 2) Differential…
North Wood Company reported net sales of $500,000 variable cost of goods sold of $200,000, variable selling and administrative expense of $85,000 fixed manufacturing cost of $105,000, and mixed selling and administrative expenses of $80,000. The contribution margin is
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$62 per unit) Cost of goods sold (@ $40 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $249,000 fixed each year. The company's $40 unit product cost is computed as follows: Units produced Units sold Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($330,000 22,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 Year 2 $ 1,054,000 $ 1,674,000 1,080,000 594,000 330,000 $ 264,000 Year 1 22,000 17,000 Required 1 680,000 374,000 300,000 $ 74,000 Required 2 Required 3 Year 2 22,000 27,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable…
A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year: Sales $233,300 Cost of goods sold 111,000 Gross profit $122,300 Operating expenses 145,000 Loss from operations $(22,700) It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Continue RoyalCola (Alternative 1) Discontinue RoyalCola (Alternative 2) Differential Effecton Income(Alternative 2)…
Required information [The following information applies to the questions displayed below.] Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales (11,600 units at $225 each) Variable costs (11,600 units at $180 each) Contribution margin Fixed costs Income $ 2,610,000 2,088,000 522,000 315,000 $ 207,000 1. Assume Hudson has a target income of $150,000. What amount of sales (in dollars) is needed to produce this target income? 2. If Hudson achieves its target income, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.)
Darby Company, operating at full capacity, sold 124,200 units at a price of $84 per unit during the current year. Its income statement is as follows: Sales $10,432,800 Cost of goods sold 3,696,000 Gross profit $6,736,800 Expenses: Selling expenses $1,848,000 Administrative expenses 1,120,000 Total expenses 2,968,000 Income from operations $3,768,800 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $924,000 in yearly sales. The expansion will increase fixed costs by $123,200, but will not affect the relationship between sales and variable costs. 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs $fill in the blank 1 Total fixed…
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D’Souza Company sold 12,000 units of its product for $76.00 per unit. Cost of goods sold is $54.60 per unit. Each unit had $49.20 in variable cost of goods sold and variable selling and administrative expenses are $9.60 per unit. Compute gross profit under absorption costing.
A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year: Sales $236,800 Cost of goods sold 109,000 Gross profit $127,800 Operating expenses 145,000 Loss from operations $(17,200) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Continue RoyalCola (Alternative 1) Discontinue RoyalCola (Alternative 2) Differential Effecton Income(Alternative 2)…
The following information is available from the accounting records of Wisconsin International Inc.. Sales at 65% of Capacity $89,500 Fixed costs $36,950 Variable costs $28,350 Total costs $65,300 Net Income $24,200 a) Compute the break-even point in sales dollars (round off two the nearest cent) $ b) Compute the break-even point as a percent of capacity. (round off two decimal places) %
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