Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lump sum amount in case of consolidated amount is given as details. To prepare: A contribution format income statement.

Question

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Answer 1

Question

Chapter 1, Problem 1.19P

1.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lump sum amount in case of consolidated amount is given as details.

To prepare: A contribution format income statement.

1.

Expert Solution

Answer to Problem 1.19P

Contribution Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
	Selling expenses	15000
	Administrative expenses (note 2)	12000	240000
3.	Contribution Margin (1-2)		60000
4.	Fixed expenses:
	Selling expenses (note 3)	30000
	Administrative expenses	12000	42000
5.	Net operating income (3-4)		18000

Therefore, the net operating income under contribution format income statement would be $18000.

Explanation of Solution

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

Both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

Units sold= 1000 units.

When the financial statements of a company are observed, it shows the financial position of the company. Income statement is one such important financial statement which shows the profitability that is earned by the company during a specific period. All the incomes, expenses, gains and losses for that period are accounted. When the revenues and expenses are compared, we get the difference of Net income during that specific period. Let us now calculate the net operating income under contribution format. In this format, all the fixed costs are subtracted from the contribution margin.

The formula for contribution margin is:- Contribution=Sales−Variable cost

Note 1:Calculation of cost of goods sold:

Cost of good sold=Beginning merchandise inventory+Purchases−Ending merchandise inventory⇒$20000+$200000+−$7000⇒$213000

Therefore, cost of goods sold would be $213000.

Note 2: Calculation of Variable Administrative expenses:

Variable Administrative expenses=Total variable cost−Cost of goods sold−Variable selling expenses⇒$240000−$213000−$15000⇒$12000

Note 3: Calculation of Fixed selling expenses.

We need to calculate total fixed costs:

Total fixed costs=Contribution margin−Net operating income⇒$60000−$18000=$42000

Therefore, using the values of total fixed costs and fixed administrative expenses, let us calculate the fixed selling expenses.

Fixed Selling expenses=Total fixed costs−Fixed administrative expenses⇒$42000−$12000=$30000

2.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To prepare: A traditional format income statement.

2.

Expert Solution

Answer to Problem 1.19P

Traditional Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
3.	Gross margin (1-2)		87000
4.	Selling and administrative expenses:
	Fixed Selling expenses (note 3)	30000
	Variable selling expenses	15000
	Fixed administrative expenses	12000
	Administrative expenses (note 2)	12000	69000
5.	Net operating income (3-4)		18000

Therefore the net operating income under traditional format would be $18000.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the net operating income under traditional format. In this format, net operating income is calculated by subtracting all selling and administrative expenses from the gross margin.

Therefore the net operating income under traditional format would be $18000.

3.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The Selling price per unit.

3.

Expert Solution

Answer to Problem 1.19P

The selling price per unit would be $300.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the selling price per unit.

Selling price per unit=Total salesUnits sold⇒$3000001000 units=$300

Therefore, the selling price per unit would be $300.

4.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The variable cost per unit.

4.

Expert Solution

Answer to Problem 1.19P

The variable cost per unit would be $240.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the variable cost per unit.

Variable cost per unit=Total variable costUnits sold⇒$2400001000 units=$240

Therefore, the variable cost per unit would be $240.

5.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The contribution margin per unit.

5.

Expert Solution

Answer to Problem 1.19P

The contribution margin per unit would be $60.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the contribution margin per unit.

Contribution margin per unit=Selling price per unit−Variable cost per unit⇒$300−$240=$60

Therefore, the contribution margin per unit would be $60.

6.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To analyze: The requirement of income statement in estimating changes in net operating income with respect to changes in unit sales.

6.

Expert Solution

Answer to Problem 1.19P

The contribution format is more beneficial because of the organization of cost on the basis of cost behavior.

Explanation of Solution

Units sold= 1000 units.

When both the formats of income statements are compared, i.e., contribution format and the traditional format, we find that the contribution format is more beneficial as it organizes the costs according to its nature of cost behavior. Further, this contribution format helps the managers to quickly compute the change of variable costs in respect to change in unit sales.

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Answer 2

Question

Chapter 1, Problem 1.19P

1.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lump sum amount in case of consolidated amount is given as details.

To prepare: A contribution format income statement.

1.

Expert Solution

Answer to Problem 1.19P

Contribution Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
	Selling expenses	15000
	Administrative expenses (note 2)	12000	240000
3.	Contribution Margin (1-2)		60000
4.	Fixed expenses:
	Selling expenses (note 3)	30000
	Administrative expenses	12000	42000
5.	Net operating income (3-4)		18000

Therefore, the net operating income under contribution format income statement would be $18000.

Explanation of Solution

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

Both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

Units sold= 1000 units.

When the financial statements of a company are observed, it shows the financial position of the company. Income statement is one such important financial statement which shows the profitability that is earned by the company during a specific period. All the incomes, expenses, gains and losses for that period are accounted. When the revenues and expenses are compared, we get the difference of Net income during that specific period. Let us now calculate the net operating income under contribution format. In this format, all the fixed costs are subtracted from the contribution margin.

The formula for contribution margin is:- Contribution=Sales−Variable cost

Note 1:Calculation of cost of goods sold:

Cost of good sold=Beginning merchandise inventory+Purchases−Ending merchandise inventory⇒$20000+$200000+−$7000⇒$213000

Therefore, cost of goods sold would be $213000.

Note 2: Calculation of Variable Administrative expenses:

Variable Administrative expenses=Total variable cost−Cost of goods sold−Variable selling expenses⇒$240000−$213000−$15000⇒$12000

Note 3: Calculation of Fixed selling expenses.

We need to calculate total fixed costs:

Total fixed costs=Contribution margin−Net operating income⇒$60000−$18000=$42000

Therefore, using the values of total fixed costs and fixed administrative expenses, let us calculate the fixed selling expenses.

Fixed Selling expenses=Total fixed costs−Fixed administrative expenses⇒$42000−$12000=$30000

2.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To prepare: A traditional format income statement.

2.

Expert Solution

Answer to Problem 1.19P

Traditional Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
3.	Gross margin (1-2)		87000
4.	Selling and administrative expenses:
	Fixed Selling expenses (note 3)	30000
	Variable selling expenses	15000
	Fixed administrative expenses	12000
	Administrative expenses (note 2)	12000	69000
5.	Net operating income (3-4)		18000

Therefore the net operating income under traditional format would be $18000.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the net operating income under traditional format. In this format, net operating income is calculated by subtracting all selling and administrative expenses from the gross margin.

Therefore the net operating income under traditional format would be $18000.

3.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The Selling price per unit.

3.

Expert Solution

Answer to Problem 1.19P

The selling price per unit would be $300.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the selling price per unit.

Selling price per unit=Total salesUnits sold⇒$3000001000 units=$300

Therefore, the selling price per unit would be $300.

4.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The variable cost per unit.

4.

Expert Solution

Answer to Problem 1.19P

The variable cost per unit would be $240.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the variable cost per unit.

Variable cost per unit=Total variable costUnits sold⇒$2400001000 units=$240

Therefore, the variable cost per unit would be $240.

5.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The contribution margin per unit.

5.

Expert Solution

Answer to Problem 1.19P

The contribution margin per unit would be $60.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the contribution margin per unit.

Contribution margin per unit=Selling price per unit−Variable cost per unit⇒$300−$240=$60

Therefore, the contribution margin per unit would be $60.

6.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To analyze: The requirement of income statement in estimating changes in net operating income with respect to changes in unit sales.

6.

Expert Solution

Answer to Problem 1.19P

The contribution format is more beneficial because of the organization of cost on the basis of cost behavior.

Explanation of Solution

Units sold= 1000 units.

When both the formats of income statements are compared, i.e., contribution format and the traditional format, we find that the contribution format is more beneficial as it organizes the costs according to its nature of cost behavior. Further, this contribution format helps the managers to quickly compute the change of variable costs in respect to change in unit sales.

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Answer 3

Question

Chapter 1, Problem 1.19P

1.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lump sum amount in case of consolidated amount is given as details.

To prepare: A contribution format income statement.

1.

Expert Solution

Answer to Problem 1.19P

Contribution Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
	Selling expenses	15000
	Administrative expenses (note 2)	12000	240000
3.	Contribution Margin (1-2)		60000
4.	Fixed expenses:
	Selling expenses (note 3)	30000
	Administrative expenses	12000	42000
5.	Net operating income (3-4)		18000

Therefore, the net operating income under contribution format income statement would be $18000.

Explanation of Solution

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

Both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

Units sold= 1000 units.

When the financial statements of a company are observed, it shows the financial position of the company. Income statement is one such important financial statement which shows the profitability that is earned by the company during a specific period. All the incomes, expenses, gains and losses for that period are accounted. When the revenues and expenses are compared, we get the difference of Net income during that specific period. Let us now calculate the net operating income under contribution format. In this format, all the fixed costs are subtracted from the contribution margin.

The formula for contribution margin is:- Contribution=Sales−Variable cost

Note 1:Calculation of cost of goods sold:

Cost of good sold=Beginning merchandise inventory+Purchases−Ending merchandise inventory⇒$20000+$200000+−$7000⇒$213000

Therefore, cost of goods sold would be $213000.

Note 2: Calculation of Variable Administrative expenses:

Variable Administrative expenses=Total variable cost−Cost of goods sold−Variable selling expenses⇒$240000−$213000−$15000⇒$12000

Note 3: Calculation of Fixed selling expenses.

We need to calculate total fixed costs:

Total fixed costs=Contribution margin−Net operating income⇒$60000−$18000=$42000

Therefore, using the values of total fixed costs and fixed administrative expenses, let us calculate the fixed selling expenses.

Fixed Selling expenses=Total fixed costs−Fixed administrative expenses⇒$42000−$12000=$30000

2.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To prepare: A traditional format income statement.

2.

Expert Solution

Answer to Problem 1.19P

Traditional Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
3.	Gross margin (1-2)		87000
4.	Selling and administrative expenses:
	Fixed Selling expenses (note 3)	30000
	Variable selling expenses	15000
	Fixed administrative expenses	12000
	Administrative expenses (note 2)	12000	69000
5.	Net operating income (3-4)		18000

Therefore the net operating income under traditional format would be $18000.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the net operating income under traditional format. In this format, net operating income is calculated by subtracting all selling and administrative expenses from the gross margin.

Therefore the net operating income under traditional format would be $18000.

3.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The Selling price per unit.

3.

Expert Solution

Answer to Problem 1.19P

The selling price per unit would be $300.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the selling price per unit.

Selling price per unit=Total salesUnits sold⇒$3000001000 units=$300

Therefore, the selling price per unit would be $300.

4.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The variable cost per unit.

4.

Expert Solution

Answer to Problem 1.19P

The variable cost per unit would be $240.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the variable cost per unit.

Variable cost per unit=Total variable costUnits sold⇒$2400001000 units=$240

Therefore, the variable cost per unit would be $240.

5.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The contribution margin per unit.

5.

Expert Solution

Answer to Problem 1.19P

The contribution margin per unit would be $60.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the contribution margin per unit.

Contribution margin per unit=Selling price per unit−Variable cost per unit⇒$300−$240=$60

Therefore, the contribution margin per unit would be $60.

6.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To analyze: The requirement of income statement in estimating changes in net operating income with respect to changes in unit sales.

6.

Expert Solution

Answer to Problem 1.19P

The contribution format is more beneficial because of the organization of cost on the basis of cost behavior.

Explanation of Solution

Units sold= 1000 units.

When both the formats of income statements are compared, i.e., contribution format and the traditional format, we find that the contribution format is more beneficial as it organizes the costs according to its nature of cost behavior. Further, this contribution format helps the managers to quickly compute the change of variable costs in respect to change in unit sales.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 1, Problem 1.19P

1.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lump sum amount in case of consolidated amount is given as details.

To prepare: A contribution format income statement.

1.

Expert Solution

Answer to Problem 1.19P

Contribution Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
	Selling expenses	15000
	Administrative expenses (note 2)	12000	240000
3.	Contribution Margin (1-2)		60000
4.	Fixed expenses:
	Selling expenses (note 3)	30000
	Administrative expenses	12000	42000
5.	Net operating income (3-4)		18000

Therefore, the net operating income under contribution format income statement would be $18000.

Explanation of Solution

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

Both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

Units sold= 1000 units.

When the financial statements of a company are observed, it shows the financial position of the company. Income statement is one such important financial statement which shows the profitability that is earned by the company during a specific period. All the incomes, expenses, gains and losses for that period are accounted. When the revenues and expenses are compared, we get the difference of Net income during that specific period. Let us now calculate the net operating income under contribution format. In this format, all the fixed costs are subtracted from the contribution margin.

The formula for contribution margin is:- Contribution=Sales−Variable cost

Note 1:Calculation of cost of goods sold:

Cost of good sold=Beginning merchandise inventory+Purchases−Ending merchandise inventory⇒$20000+$200000+−$7000⇒$213000

Therefore, cost of goods sold would be $213000.

Note 2: Calculation of Variable Administrative expenses:

Variable Administrative expenses=Total variable cost−Cost of goods sold−Variable selling expenses⇒$240000−$213000−$15000⇒$12000

Note 3: Calculation of Fixed selling expenses.

We need to calculate total fixed costs:

Total fixed costs=Contribution margin−Net operating income⇒$60000−$18000=$42000

Therefore, using the values of total fixed costs and fixed administrative expenses, let us calculate the fixed selling expenses.

Fixed Selling expenses=Total fixed costs−Fixed administrative expenses⇒$42000−$12000=$30000

2.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To prepare: A traditional format income statement.

2.

Expert Solution

Answer to Problem 1.19P

Traditional Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
3.	Gross margin (1-2)		87000
4.	Selling and administrative expenses:
	Fixed Selling expenses (note 3)	30000
	Variable selling expenses	15000
	Fixed administrative expenses	12000
	Administrative expenses (note 2)	12000	69000
5.	Net operating income (3-4)		18000

Therefore the net operating income under traditional format would be $18000.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the net operating income under traditional format. In this format, net operating income is calculated by subtracting all selling and administrative expenses from the gross margin.

Therefore the net operating income under traditional format would be $18000.

3.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The Selling price per unit.

3.

Expert Solution

Answer to Problem 1.19P

The selling price per unit would be $300.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the selling price per unit.

Selling price per unit=Total salesUnits sold⇒$3000001000 units=$300

Therefore, the selling price per unit would be $300.

4.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The variable cost per unit.

4.

Expert Solution

Answer to Problem 1.19P

The variable cost per unit would be $240.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the variable cost per unit.

Variable cost per unit=Total variable costUnits sold⇒$2400001000 units=$240

Therefore, the variable cost per unit would be $240.

5.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The contribution margin per unit.

5.

Expert Solution

Answer to Problem 1.19P

The contribution margin per unit would be $60.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the contribution margin per unit.

Contribution margin per unit=Selling price per unit−Variable cost per unit⇒$300−$240=$60

Therefore, the contribution margin per unit would be $60.

6.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To analyze: The requirement of income statement in estimating changes in net operating income with respect to changes in unit sales.

6.

Expert Solution

Answer to Problem 1.19P

The contribution format is more beneficial because of the organization of cost on the basis of cost behavior.

Explanation of Solution

Units sold= 1000 units.

When both the formats of income statements are compared, i.e., contribution format and the traditional format, we find that the contribution format is more beneficial as it organizes the costs according to its nature of cost behavior. Further, this contribution format helps the managers to quickly compute the change of variable costs in respect to change in unit sales.

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Answer 5

Chapter 1, Problem 1.19P

1.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lump sum amount in case of consolidated amount is given as details.

To prepare: A contribution format income statement.

1.

Expert Solution

Answer to Problem 1.19P

Contribution Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
	Selling expenses	15000
	Administrative expenses (note 2)	12000	240000
3.	Contribution Margin (1-2)		60000
4.	Fixed expenses:
	Selling expenses (note 3)	30000
	Administrative expenses	12000	42000
5.	Net operating income (3-4)		18000

Therefore, the net operating income under contribution format income statement would be $18000.

Explanation of Solution

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

Both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

Units sold= 1000 units.

When the financial statements of a company are observed, it shows the financial position of the company. Income statement is one such important financial statement which shows the profitability that is earned by the company during a specific period. All the incomes, expenses, gains and losses for that period are accounted. When the revenues and expenses are compared, we get the difference of Net income during that specific period. Let us now calculate the net operating income under contribution format. In this format, all the fixed costs are subtracted from the contribution margin.

The formula for contribution margin is:- Contribution=Sales−Variable cost

Note 1:Calculation of cost of goods sold:

Cost of good sold=Beginning merchandise inventory+Purchases−Ending merchandise inventory⇒$20000+$200000+−$7000⇒$213000

Therefore, cost of goods sold would be $213000.

Note 2: Calculation of Variable Administrative expenses:

Variable Administrative expenses=Total variable cost−Cost of goods sold−Variable selling expenses⇒$240000−$213000−$15000⇒$12000

Note 3: Calculation of Fixed selling expenses.

We need to calculate total fixed costs:

Total fixed costs=Contribution margin−Net operating income⇒$60000−$18000=$42000

Therefore, using the values of total fixed costs and fixed administrative expenses, let us calculate the fixed selling expenses.

Fixed Selling expenses=Total fixed costs−Fixed administrative expenses⇒$42000−$12000=$30000

2.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To prepare: A traditional format income statement.

2.

Expert Solution

Answer to Problem 1.19P

Traditional Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
3.	Gross margin (1-2)		87000
4.	Selling and administrative expenses:
	Fixed Selling expenses (note 3)	30000
	Variable selling expenses	15000
	Fixed administrative expenses	12000
	Administrative expenses (note 2)	12000	69000
5.	Net operating income (3-4)		18000

Therefore the net operating income under traditional format would be $18000.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the net operating income under traditional format. In this format, net operating income is calculated by subtracting all selling and administrative expenses from the gross margin.

Therefore the net operating income under traditional format would be $18000.

3.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The Selling price per unit.

3.

Expert Solution

Answer to Problem 1.19P

The selling price per unit would be $300.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the selling price per unit.

Selling price per unit=Total salesUnits sold⇒$3000001000 units=$300

Therefore, the selling price per unit would be $300.

4.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The variable cost per unit.

4.

Expert Solution

Answer to Problem 1.19P

The variable cost per unit would be $240.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the variable cost per unit.

Variable cost per unit=Total variable costUnits sold⇒$2400001000 units=$240

Therefore, the variable cost per unit would be $240.

5.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The contribution margin per unit.

5.

Expert Solution

Answer to Problem 1.19P

The contribution margin per unit would be $60.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the contribution margin per unit.

Contribution margin per unit=Selling price per unit−Variable cost per unit⇒$300−$240=$60

Therefore, the contribution margin per unit would be $60.

6.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To analyze: The requirement of income statement in estimating changes in net operating income with respect to changes in unit sales.

6.

Expert Solution

Answer to Problem 1.19P

The contribution format is more beneficial because of the organization of cost on the basis of cost behavior.

Explanation of Solution

Units sold= 1000 units.

When both the formats of income statements are compared, i.e., contribution format and the traditional format, we find that the contribution format is more beneficial as it organizes the costs according to its nature of cost behavior. Further, this contribution format helps the managers to quickly compute the change of variable costs in respect to change in unit sales.

Answer 6

Chapter 1, Problem 1.19P

1.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lump sum amount in case of consolidated amount is given as details.

To prepare: A contribution format income statement.

1.

Expert Solution

Answer to Problem 1.19P

Contribution Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
	Selling expenses	15000
	Administrative expenses (note 2)	12000	240000
3.	Contribution Margin (1-2)		60000
4.	Fixed expenses:
	Selling expenses (note 3)	30000
	Administrative expenses	12000	42000
5.	Net operating income (3-4)		18000

Therefore, the net operating income under contribution format income statement would be $18000.

Explanation of Solution

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

Both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

Units sold= 1000 units.

When the financial statements of a company are observed, it shows the financial position of the company. Income statement is one such important financial statement which shows the profitability that is earned by the company during a specific period. All the incomes, expenses, gains and losses for that period are accounted. When the revenues and expenses are compared, we get the difference of Net income during that specific period. Let us now calculate the net operating income under contribution format. In this format, all the fixed costs are subtracted from the contribution margin.

The formula for contribution margin is:- Contribution=Sales−Variable cost

Note 1:Calculation of cost of goods sold:

Cost of good sold=Beginning merchandise inventory+Purchases−Ending merchandise inventory⇒$20000+$200000+−$7000⇒$213000

Therefore, cost of goods sold would be $213000.

Note 2: Calculation of Variable Administrative expenses:

Variable Administrative expenses=Total variable cost−Cost of goods sold−Variable selling expenses⇒$240000−$213000−$15000⇒$12000

Note 3: Calculation of Fixed selling expenses.

We need to calculate total fixed costs:

Total fixed costs=Contribution margin−Net operating income⇒$60000−$18000=$42000

Therefore, using the values of total fixed costs and fixed administrative expenses, let us calculate the fixed selling expenses.

Fixed Selling expenses=Total fixed costs−Fixed administrative expenses⇒$42000−$12000=$30000

Answer 7

Chapter 1, Problem 1.19P

1.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lump sum amount in case of consolidated amount is given as details.

To prepare: A contribution format income statement.

Answer 8

1.

Expert Solution

Answer to Problem 1.19P

Contribution Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
	Selling expenses	15000
	Administrative expenses (note 2)	12000	240000
3.	Contribution Margin (1-2)		60000
4.	Fixed expenses:
	Selling expenses (note 3)	30000
	Administrative expenses	12000	42000
5.	Net operating income (3-4)		18000

Therefore, the net operating income under contribution format income statement would be $18000.

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

Both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

Units sold= 1000 units.

When the financial statements of a company are observed, it shows the financial position of the company. Income statement is one such important financial statement which shows the profitability that is earned by the company during a specific period. All the incomes, expenses, gains and losses for that period are accounted. When the revenues and expenses are compared, we get the difference of Net income during that specific period. Let us now calculate the net operating income under contribution format. In this format, all the fixed costs are subtracted from the contribution margin.

The formula for contribution margin is:- Contribution=Sales−Variable cost

Note 1:Calculation of cost of goods sold:

Cost of good sold=Beginning merchandise inventory+Purchases−Ending merchandise inventory⇒$20000+$200000+−$7000⇒$213000

Therefore, cost of goods sold would be $213000.

Note 2: Calculation of Variable Administrative expenses:

Variable Administrative expenses=Total variable cost−Cost of goods sold−Variable selling expenses⇒$240000−$213000−$15000⇒$12000

Note 3: Calculation of Fixed selling expenses.

We need to calculate total fixed costs:

Total fixed costs=Contribution margin−Net operating income⇒$60000−$18000=$42000

Therefore, using the values of total fixed costs and fixed administrative expenses, let us calculate the fixed selling expenses.

Fixed Selling expenses=Total fixed costs−Fixed administrative expenses⇒$42000−$12000=$30000

Answer 13

2.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To prepare: A traditional format income statement.

2.

Expert Solution

Answer to Problem 1.19P

Traditional Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
3.	Gross margin (1-2)		87000
4.	Selling and administrative expenses:
	Fixed Selling expenses (note 3)	30000
	Variable selling expenses	15000
	Fixed administrative expenses	12000
	Administrative expenses (note 2)	12000	69000
5.	Net operating income (3-4)		18000

Therefore the net operating income under traditional format would be $18000.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the net operating income under traditional format. In this format, net operating income is calculated by subtracting all selling and administrative expenses from the gross margin.

Therefore the net operating income under traditional format would be $18000.

Answer 14

2.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To prepare: A traditional format income statement.

Answer 15

2.

Expert Solution

Answer to Problem 1.19P

Traditional Format Income Statement of T Company
Sl.No.	Particulars	Amount(in $)	Amount (in $)
1.	Sales		300000
2.	Variable cost:
	Cost of goods sold(note 1)	213000
3.	Gross margin (1-2)		87000
4.	Selling and administrative expenses:
	Fixed Selling expenses (note 3)	30000
	Variable selling expenses	15000
	Fixed administrative expenses	12000
	Administrative expenses (note 2)	12000	69000
5.	Net operating income (3-4)		18000

Therefore the net operating income under traditional format would be $18000.

Answer 16

2.

Expert Solution

Answer 17

2.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the net operating income under traditional format. In this format, net operating income is calculated by subtracting all selling and administrative expenses from the gross margin.

Therefore the net operating income under traditional format would be $18000.

Answer 20

3.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The Selling price per unit.

3.

Expert Solution

Answer to Problem 1.19P

The selling price per unit would be $300.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the selling price per unit.

Selling price per unit=Total salesUnits sold⇒$3000001000 units=$300

Therefore, the selling price per unit would be $300.

Answer 21

3.

To determine

Concept Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The Selling price per unit.

Answer 22

3.

Expert Solution

Answer to Problem 1.19P

The selling price per unit would be $300.

Answer 23

3.

Expert Solution

Answer 24

3.

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the selling price per unit.

Selling price per unit=Total salesUnits sold⇒$3000001000 units=$300

Therefore, the selling price per unit would be $300.

Answer 27

4.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The variable cost per unit.

4.

Expert Solution

Answer to Problem 1.19P

The variable cost per unit would be $240.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the variable cost per unit.

Variable cost per unit=Total variable costUnits sold⇒$2400001000 units=$240

Therefore, the variable cost per unit would be $240.

Answer 28

4.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The variable cost per unit.

Answer 29

4.

Expert Solution

Answer to Problem 1.19P

The variable cost per unit would be $240.

Answer 30

4.

Expert Solution

Answer 31

4.

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the variable cost per unit.

Variable cost per unit=Total variable costUnits sold⇒$2400001000 units=$240

Therefore, the variable cost per unit would be $240.

Answer 34

5.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The contribution margin per unit.

5.

Expert Solution

Answer to Problem 1.19P

The contribution margin per unit would be $60.

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the contribution margin per unit.

Contribution margin per unit=Selling price per unit−Variable cost per unit⇒$300−$240=$60

Therefore, the contribution margin per unit would be $60.

Answer 35

5.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; and

Contribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

The contribution margin per unit.

Answer 36

5.

Expert Solution

Answer to Problem 1.19P

The contribution margin per unit would be $60.

Answer 37

5.

Expert Solution

Answer 38

5.

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

Units sold= 1000 units.

Let us now calculate the contribution margin per unit.

Contribution margin per unit=Selling price per unit−Variable cost per unit⇒$300−$240=$60

Therefore, the contribution margin per unit would be $60.

Answer 41

6.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To analyze: The requirement of income statement in estimating changes in net operating income with respect to changes in unit sales.

6.

Expert Solution

Answer to Problem 1.19P

The contribution format is more beneficial because of the organization of cost on the basis of cost behavior.

Explanation of Solution

Units sold= 1000 units.

When both the formats of income statements are compared, i.e., contribution format and the traditional format, we find that the contribution format is more beneficial as it organizes the costs according to its nature of cost behavior. Further, this contribution format helps the managers to quickly compute the change of variable costs in respect to change in unit sales.

Answer 42

6.

To determine

Introduction:

Contribution margin: It is the difference between Sales and variable costs.Contribution margin is calculated on the basis of unit details when the details given are in units and in lumpsum amount in case of consolidated amount is given as details.

Contribution=Selling price per unit−Variable cost per unit ; andContribution=Sales−Variable cost

So, both the formulasare used based on the information given. Ultimately, contribution refers to that fixed cost which is not utilized by variable cost.

To analyze: The requirement of income statement in estimating changes in net operating income with respect to changes in unit sales.

Answer 43

6.

Expert Solution

Answer to Problem 1.19P

The contribution format is more beneficial because of the organization of cost on the basis of cost behavior.

Answer 44

6.

Expert Solution

Answer 45

6.

Expert Solution

Answer 46

Expert Solution

Answer 47

Explanation of Solution

Units sold= 1000 units.

When both the formats of income statements are compared, i.e., contribution format and the traditional format, we find that the contribution format is more beneficial as it organizes the costs according to its nature of cost behavior. Further, this contribution format helps the managers to quickly compute the change of variable costs in respect to change in unit sales.