5th Edition

ISBN: 9781259631122

Author: Edmonds, Thomas P.

Publisher: Mcgraw-hill Education,

Concept explainers

Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost st…

Marginal Costing

Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs r…

Videos

Textbook Question

Chapter 11, Problem 13E

Prepare an income statement using the contribution margin approach

AJ Manufacturing Company incurred $50,000 of fixed product cost and $40,000 of variable product cost during its first year of operation. Also during its first year, AJ incurred $16,000 of fixed and $13,000 of variable selling and administrative costs. The company sold all of the units it produced for $160,000.

Required

a. Prepare an income statement using the format required by generally accepted accounting principles (GAAP).
b. Prepare an income statement using the contribution margin approach.
c. Explain why both statements have the same amount of net income.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 11, Problem 12E

Chapter 11, Problem 14E

Students have asked these similar questions

Can you help me solve this general accounting question using the correct accounting procedures?

Question 1181 28 Current Attempt in Progress Here are comparative balance sheets for Migitsu Company. Prepare a statement of cash flows-indirect method. MIGITSU COMPANY Comparative Balance Sheets December 31 Assets 2020 2019 Cash $73,000 $22,000 Accounts receivable 87,000 76.000 Inventory 170,000 191.000 Land 72,000 100.000 Equipment 260,000 200.000 Accumulated depreciation - equipment (66,000) (32.000) Total $596,000 $557,000 Liabilities and Stockholders' Equity Accounts payable $37,000 $47.000 Bonds payable 150,000 210,000 Common stock ($1 par) 216.000 174,000 Retained earnings 193,000 126.000 Total $596,000 $557,000 Additional information: 1 Net income for 2020 was $100,000. N Cash dividends of $33,000 were declared and paid. 3. Bonds payable amounting to $60,000 were redeemed for cash $60,000. -18 4. Common stock was issued for $42,000 cash. 5. Equipment that cost $50,000 and had a book value of $30,000 was sold for $36,000 during 2020; land was sold at cost.

I need guidance with this general accounting problem using the right accounting principles.

Chapter 11 Solutions

Survey Of Accounting

Ch. 11 - 1.Define fixed cost and variable cost and give an...Ch. 11 - Prob. 2Q Ch. 11 - 3.Define the term operating leverage and explain...Ch. 11 - Prob. 4Q Ch. 11 - Prob. 5Q Ch. 11 - 6.If volume is increasing, would a company benefit...Ch. 11 - Explain the risk and rewards to a company that...Ch. 11 - 9.Are companies with predominately fixed cost...Ch. 11 - 10.How is the relevant range of activity related...Ch. 11 - Which cost structure has the greater risk?...

Ch. 11 - 14.The president of Bright Corporation tells you...Ch. 11 - Prob. 12Q Ch. 11 - Prob. 13Q Ch. 11 - Prob. 14Q Ch. 11 - Prob. 15Q Ch. 11 - Prob. 16Q Ch. 11 - Prob. 17Q Ch. 11 - Prob. 1E Ch. 11 - Prob. 2E Ch. 11 - Prob. 3E Ch. 11 - Exercise 2-4A Determining total variable cost The...Ch. 11 - Prob. 5E Ch. 11 - Prob. 6E Ch. 11 - Prob. 7E Ch. 11 - Prob. 8E Ch. 11 - Prob. 9E Ch. 11 - Prob. 10E Ch. 11 - Prob. 11E Ch. 11 - Prob. 12E Ch. 11 - Prepare an income statement using the contribution...Ch. 11 - Prob. 14E Ch. 11 - Prob. 15E Ch. 11 - Prob. 16E Ch. 11 - Prob. 17E Ch. 11 - Prob. 18E Ch. 11 - Prob. 19E Ch. 11 - Prob. 20E Ch. 11 - Prob. 21P Ch. 11 - Prob. 22P Ch. 11 - Problem 2-19A Context-sensitive nature of cost...Ch. 11 - Prob. 24P Ch. 11 - Prob. 25P Ch. 11 - Prob. 26P Ch. 11 - Prob. 27P Ch. 11 - Prob. 28P Ch. 11 - Prob. 29P Ch. 11 - Prob. 1ATC Ch. 11 - Prob. 2ATC Ch. 11 - Prob. 3ATC Ch. 11 - Prob. 4ATC Ch. 11 - Prob. 5ATC

Knowledge 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.

Solution Summary: The author explains the income statement format required by generally accepted accounting principles (GAAP) and the contribution margin approach.

Concept explainers

Videos

Want to see the full answer?

Chapter 11 Solutions