QUESTION 2- COST-VOLUME -PROFIT (CVP) Analysis Question matics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below: Total Per Unit Percentage of Sales Sales (25,000 units) $ 2,500,000 $ 100 100% Less variable expenses $ 1,500,000 $ 60 ? % Contribution Margin $ 1,000,000 $ 40 ? % Less Fixed Expenses $ 800,000 Operating Income $ 200,000 Management believes operating income can be further improved and would like you to prepare the following analysis: Required: Compute the company’s Contribution Margin ( CM ) ratio and variable expense ratio. Compute the company’s break-even point in both units and sales dollars.Use the equation method Assume that sales increase by $ 600,000 next year. If cost behaviour patterns remain unchanged, by how much will the company’s operating income increase. Use the Contribution Margin (CM) ratio to determine your answer.
QUESTION 2- COST-VOLUME -PROFIT (CVP) Analysis Question matics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below: Total Per Unit Percentage of Sales Sales (25,000 units) $ 2,500,000 $ 100 100% Less variable expenses $ 1,500,000 $ 60 ? % Contribution Margin $ 1,000,000 $ 40 ? % Less Fixed Expenses $ 800,000 Operating Income $ 200,000 Management believes operating income can be further improved and would like you to prepare the following analysis: Required: Compute the company’s Contribution Margin ( CM ) ratio and variable expense ratio. Compute the company’s break-even point in both units and sales dollars.Use the equation method Assume that sales increase by $ 600,000 next year. If cost behaviour patterns remain unchanged, by how much will the company’s operating income increase. Use the Contribution Margin (CM) ratio to determine your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
QUESTION 2- COST-VOLUME -PROFIT (CVP) Analysis Question
matics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below:
|
|
Total |
Per Unit |
Percentage of Sales |
|
Sales (25,000 units) |
$ 2,500,000 |
$ 100 |
100% |
|
Less variable expenses |
$ 1,500,000 |
$ 60 |
? % |
|
Contribution Margin |
$ 1,000,000 |
$ 40 |
? % |
|
Less Fixed Expenses |
$ 800,000 |
|
|
|
Operating Income |
$ 200,000 |
|
|
Management believes operating income can be further improved and would like you to prepare the following analysis:
Required:
- Compute the company’s Contribution Margin ( CM ) ratio and variable expense ratio.
- Compute the company’s break-even point in both units and sales dollars.Use the equation method
- Assume that sales increase by $ 600,000 next year. If cost behaviour patterns remain unchanged, by how much will the company’s operating income increase. Use the Contribution Margin (CM) ratio to determine your answer.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
matics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below:
|
|
Total |
Per Unit |
Percentage of Sales |
|
Sales (25,000 units) |
$ 2,500,000 |
$ 100 |
100% |
|
Less variable expenses |
$ 1,500,000 |
$ 60 |
? % |
|
Contribution Margin |
$ 1,000,000 |
$ 40 |
? % |
|
Less Fixed Expenses |
$ 800,000 |
|
|
|
Operating Income |
$ 200,000 |
|
|
Management believes operating income can be further improved and would like you to prepare the following analysis:
Required:
- Refer to the original data. Assume that next year, management wants the company to earn a minimum profit of $ 500,000. How many units will have to sold to meet this target profit figure?
- Refer to the original data. Compute the company’s margin of safety in both dollar and percentage form.
- Assume that, through a more intense effort by the sales staff, the company’s sales increase by 12 %. By what percentage would you expect operating income to increase? Verify your answer by preparing a new income statement showing a 12 % increase in sales.
Solution
by Bartleby ExpertKnowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education