Operating Income It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation: O p e r a t i n g i n c o m e = R e v e n u e − V a r i a b l e e x p e n s e s − F i x e d e x p e n s e s Variable expenses The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa. Fixed expenses These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period. Requirement a: To calculate: Operating income of May

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Answer 1

Question

Chapter 12, Problem 12.27P

To determine

Concept Introduction:

Operating Income

It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

To calculate:

Operating income of May

To determine

Concept Introduction:

Contribution margin

It is the difference between total revenue and variable expenses. Contribution margin equals the amount that sales exceed variable costs. It measures how efficiently a company can produce products and maintain low levels of variable cost.

Contribution margin per unit= Total contribution margin/ Sales volume

Contribution margin, when expressed in percentage form is known as Contribution margin ratio and can be calculated as follows:

Contribution margin ratio= Contribution margin/ Sales revenue*100

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Requirement b:

To calculate:

Break- even point in terms of units sold and total revenues

To determine

Concept Introduction:

Operating Income

<[>It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement c:

Operating income with new cost structure
Break- even point in units with new cost structure
Reason for suggestion of investing in automated equipment and accept new cost structure
Reasons if management does not accept recommendation

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Answer 2

Question

Chapter 12, Problem 12.27P

To determine

Concept Introduction:

Operating Income

It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

To calculate:

Operating income of May

To determine

Concept Introduction:

Contribution margin

It is the difference between total revenue and variable expenses. Contribution margin equals the amount that sales exceed variable costs. It measures how efficiently a company can produce products and maintain low levels of variable cost.

Contribution margin per unit= Total contribution margin/ Sales volume

Contribution margin, when expressed in percentage form is known as Contribution margin ratio and can be calculated as follows:

Contribution margin ratio= Contribution margin/ Sales revenue*100

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Requirement b:

To calculate:

Break- even point in terms of units sold and total revenues

To determine

Concept Introduction:

Operating Income

<[>It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement c:

Operating income with new cost structure
Break- even point in units with new cost structure
Reason for suggestion of investing in automated equipment and accept new cost structure
Reasons if management does not accept recommendation

Expert Solution & Answer

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Answer 3

Question

Chapter 12, Problem 12.27P

To determine

Concept Introduction:

Operating Income

It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

To calculate:

Operating income of May

To determine

Concept Introduction:

Contribution margin

It is the difference between total revenue and variable expenses. Contribution margin equals the amount that sales exceed variable costs. It measures how efficiently a company can produce products and maintain low levels of variable cost.

Contribution margin per unit= Total contribution margin/ Sales volume

Contribution margin, when expressed in percentage form is known as Contribution margin ratio and can be calculated as follows:

Contribution margin ratio= Contribution margin/ Sales revenue*100

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Requirement b:

To calculate:

Break- even point in terms of units sold and total revenues

To determine

Concept Introduction:

Operating Income

<[>It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement c:

Operating income with new cost structure
Break- even point in units with new cost structure
Reason for suggestion of investing in automated equipment and accept new cost structure
Reasons if management does not accept recommendation

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 12.27P

To determine

Concept Introduction:

Operating Income

It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

To calculate:

Operating income of May

To determine

Concept Introduction:

Contribution margin

It is the difference between total revenue and variable expenses. Contribution margin equals the amount that sales exceed variable costs. It measures how efficiently a company can produce products and maintain low levels of variable cost.

Contribution margin per unit= Total contribution margin/ Sales volume

Contribution margin, when expressed in percentage form is known as Contribution margin ratio and can be calculated as follows:

Contribution margin ratio= Contribution margin/ Sales revenue*100

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Requirement b:

To calculate:

Break- even point in terms of units sold and total revenues

To determine

Concept Introduction:

Operating Income

<[>It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement c:

Operating income with new cost structure
Break- even point in units with new cost structure
Reason for suggestion of investing in automated equipment and accept new cost structure
Reasons if management does not accept recommendation

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 12, Problem 12.27P

To determine

Concept Introduction:

Operating Income

It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

To calculate:

Operating income of May

To determine

Concept Introduction:

Contribution margin

It is the difference between total revenue and variable expenses. Contribution margin equals the amount that sales exceed variable costs. It measures how efficiently a company can produce products and maintain low levels of variable cost.

Contribution margin per unit= Total contribution margin/ Sales volume

Contribution margin, when expressed in percentage form is known as Contribution margin ratio and can be calculated as follows:

Contribution margin ratio= Contribution margin/ Sales revenue*100

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Requirement b:

To calculate:

Break- even point in terms of units sold and total revenues

To determine

Concept Introduction:

Operating Income

<[>It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement c:

Operating income with new cost structure
Break- even point in units with new cost structure
Reason for suggestion of investing in automated equipment and accept new cost structure
Reasons if management does not accept recommendation

Answer 6

Chapter 12, Problem 12.27P

To determine

Concept Introduction:

Operating Income

It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

To calculate:

Operating income of May

Answer 7

Chapter 12, Problem 12.27P

To determine

Concept Introduction:

Operating Income

It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

To calculate:

Operating income of May

Answer 8

To determine

Concept Introduction:

Contribution margin

It is the difference between total revenue and variable expenses. Contribution margin equals the amount that sales exceed variable costs. It measures how efficiently a company can produce products and maintain low levels of variable cost.

Contribution margin per unit= Total contribution margin/ Sales volume

Contribution margin, when expressed in percentage form is known as Contribution margin ratio and can be calculated as follows:

Contribution margin ratio= Contribution margin/ Sales revenue*100

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Requirement b:

To calculate:

Break- even point in terms of units sold and total revenues

Answer 9

To determine

Concept Introduction:

Contribution margin

It is the difference between total revenue and variable expenses. Contribution margin equals the amount that sales exceed variable costs. It measures how efficiently a company can produce products and maintain low levels of variable cost.

Contribution margin per unit= Total contribution margin/ Sales volume

Contribution margin, when expressed in percentage form is known as Contribution margin ratio and can be calculated as follows:

Contribution margin ratio= Contribution margin/ Sales revenue*100

Variable expenses

The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Requirement b:

To calculate:

Break- even point in terms of units sold and total revenues

Answer 10

To determine

Concept Introduction:

Operating Income

<[>It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement c:

Operating income with new cost structure
Break- even point in units with new cost structure
Reason for suggestion of investing in automated equipment and accept new cost structure
Reasons if management does not accept recommendation

Answer 11

To determine

Concept Introduction:

Operating Income

<[>It is the net income of the entity without including the impact of any financial activity or taxed. It measures entity's ability to generate earnings from its operational activities. It can be calculated using the following equation:

Operating income= Revenue− Variable expenses− Fixed expenses

Variable expenses The expenses which are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses

These expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement c:

Operating income with new cost structure
Break- even point in units with new cost structure
Reason for suggestion of investing in automated equipment and accept new cost structure
Reasons if management does not accept recommendation

Answer 12

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Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 12 - Prob. 12.1ME Ch. 12 - Prob. 12.2ME Ch. 12 - Prob. 12.3ME Ch. 12 - Prob. 12.4ME Ch. 12 - Prob. 12.5ME Ch. 12 - Prob. 12.6ME Ch. 12 - Exercise 12.7 LO 3 Cost classifications For each...Ch. 12 - Exercise 12.8 LO 3 Cost classifications For each...Ch. 12 - Prob. 12.9E Ch. 12 - Prob. 12.10E

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Chapter 12 Solutions