The President of Leyesa Corporation was informed that production costs were 3% lower in 2023 than that of 2022.Statistics shown by the selling division indicated that the quantity sold in 2023 was significantly greater than quantitysold in 2022. The President is wondering why, despite the favorable information provided by the selling and productiondivision, gross margin for 2022 was still higher than that of 2023 as shown below: December 31, 2020 December31, 2019 Net Sales 1,305,00 1,160,000 Cost of Sales 843, 900 696,000 Gross Margin 461, 100 464,000

The objective of the question is to understand why the gross margin for 2022 was higher than that of…

Answered: The President of Leyesa Corporation was…

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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The management requested you to determine the cause of the decline in gross profit on sales in spite of the favorable information given by the Sales division that the quantity sold in 2022 was 25% higher than in 2021 and that the production costs in 2022 were lower than that of the 2021 by 6%. The increase (decrease) in net sales due to volume factor or the Sales Volume Variance is A. P194,000 B. (P312,500) C. P312,500 D. (P194,000)
Toys Manufacturing incurs annual fixed costs of P250,000 in producing and selling “Tales.” Estimated unit sales for 2019 are 125,000. An after-tax income of P75,000 is desired by management. The company projects its income tax rate at 40 percent. What is the maximum amount that Toys can expend for variable costs per unit and still meet its profit objective if the sales price per unit is estimated at P6? P3.37 P3.59 P3.00 P3.70
The net operating income reported by Erin Company in March 2021 amounted to $10,000, however, it decreased by $40,000 in April 2021, ending up with a loss. Besides, Erin Company is a retail company, and its management has provided the following-additional information for April 2021. tem Amsunt Sales Volume 75.000 unita Unit Selling Price Tetal Coribution Margin $1.500,000 Variable Cot of Goods Sed S00.000 Variable Selling Expenses per Unit Variahle Administrative Epees $9 per unit Fisod Selling Expon Fixed Administrative Expenses 25% of Total Administrative Expenses) 77 Contribution Margin Ratie 40% 17. What is the unit selling price? $20 per unit $30 per unit $41 per unit O $50 per unit O None of the above 18. What is the amount of variable administrative expenses for April 2021? * O $225,000 O $675,000 O $900,000 $1,305,000 O None of the above O O O O O
Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 80,000 units of product: net sales $2,000,000; total costs and expenses $2,235,000; and net loss $235,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,568,000 $1,050,000 $518,000 Selling expenses 517,000 92,000 425,000 Administrative expenses 150,000 58,000 92,000 $2,235,000 $1,200,000 $1,035,000 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. 3. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,000 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. (a) Compute the break-even point in dollars for 2019.…
Rose Trading had RM210,000 of net profit in year 2021 when the selling price per unit was RM150, the variable costs per unit were RM90, and the fixed costs were RM570,000. Management expects per unit data and total fixed costs to remain the same in year 2022. The manager of Rose Trading is under pressure from investors to increase net profit by RM52,000 in year 2022.Required:(iii) Assume that Rose Trading sells the same number of units in year 2022 as it did in year 2021. What would the selling price have to be to reach the shareholders’ desired profit level?(iv) Assuming actual sales in year 2022 are 16,000 units with the new selling price as computed in (c), compute the margin of safety in (i) units and (ii) as a ratio. Briefly explain your findings. (Tips: Interpret about margin of safety)
Violet Sales Corp, reports the year-end information from 2023 as follows: Sales (35,500 units) $284,000 Cost of goods sold 105,000 Gross margin 179,000 Operating expenses 152,000 Operating income $27,000 Violet is developing the 2024 budget. In 2024 the company would like to increase selling prices by 3.5%, and as a result expects a decrease in sales volume of 14%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost. What is budgeted sales for 2024?
Sunland Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 21% of sales. The income statement for the year ending December 31, 2022, is as follows. SUNLAND BEAUTY CORPORATIONIncome StatementFor the Year Ended December 31, 2022 Sales $71,200,000 Cost of goods sold Variable $30,616,000 Fixed 8,560,000 39,176,000 Gross profit $32,024,000 Selling and marketing expenses Commissions $14,952,000 Fixed costs 10,660,400 25,612,400 Operating income $6,411,600 The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 7% and incur additional fixed costs of $9,968,000. Calculate the company’s break-even point in sales dollars for the year 2022 if it hires its own sales force to replace the network of agents. Break-even…
Spartans Inc gathered data on sales (in units) and costs ($) over the past 12 months (displayed below) and estimated its cost function as: Y = $2,395 + $34.81(X) Month January February March April May June July August September October November Sales (units) December 228 129 218 156 177 68 129 83 90 107 139 Costs ($) $10,332 $8,651 $11,294 $9,734 $10,006 $4,762 $6,837 $5,138 $8,004 $7,774 $10,869 $6,935 98 (data used to generate cost function) Over the next three months Spartans Inc. has forecasted units sales (in units) as shown below. Estimate the total costs to be incurred and indicate whether the cost function generates a reliable forecast value
Analyzing Operational ChangesOperating results for department B of Shaw Company during 2019 are as follows: Sales $800,000 Cost of goods sold 480,000 Gross profit 320,000 Direct expenses 200,000 Common expenses 123,000 Total expenses 323,000 Net loss $(3,000) If department B could maintain the same physical volume of product sold while raising selling prices an average of 6% and making an additional advertising expenditure of $40,000, what would be the effect on the department’s net income or net loss? (Ignore income tax in your calculations.) Use a negative sign with your answer to indicate if the effect increases the company's net loss. If Department B increased its selling price by 6%, the effect on net income (loss) would be $Answer
Blossom Corp.’s sales slumped badly in 2020. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 575,500 units of product: sales $2,877,500, total costs and expenses $2,984,880, and net loss $107,380. Costs and expenses consisted of the amounts shown below. Total Variable Fixed Cost of goods sold $2,455,420 $1,887,640 $567,780 Selling expenses 287,750 105,892 181,858 Administrative expenses 241,710 78,268 163,442 $2,984,880 $2,071,800 $913,080 Management is considering the following independent alternatives for 2021. 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $172,650 to total salaries of $69,060 plus a 4% commission on sales. Compute the break-even point in dollars for 2020. Break-even point $…
Crane Company has sales of $1,594,000 for the first quarter of 2022. In making the sales, the company incurred the following costs and expenses. Product costs Selling expenses $513,000 113,000 Administrative expenses 93,000 Variable Net Income $ Fixed $563,000 88,000 80,000 Calculate the company's net income under CVP for 2022.
The CVP income statement for Blossom Machine Company for 2021 appears below. BLOSSOMMACHINE COMPANY Income Statement For the Year Ended December 31, 2021 Sales (42,000 units) $1,050,000 Variable expenses Contribution margin Fixed expenses Net income (loss) (b) Answer the following independent questions. (c) What was the company's break-even sales dollars in 2021? 735,000 Your answer is correct. eTextbook and Media 315,000 360,000 ($45,000) Break-even point in sales dollars $ Additional units Your answer is correct. How many additional units would the company have had to sell in 2022 to earn a net income of $45,000? eTextbook and Medial Number of units sold 1,200,000 12,000 Attempts: 3 of 5 used If the company reduces variable costs by $2.50 per unit in 2022 while other costs and unit revenues remain unchanged, how many units will the company have to sell to earn a net income of $45,000? (Round per unit value to 2 decimal places, e.g. 52.75. Final answer to O decimal places, e.g.…

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