EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475950
Author: Datar
Publisher: PEARSON CO
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 3, Problem 3.35E
Contribution margin, decision making. Welch Men’s Clothing’s revenues and cost data for 2017 are as follows:
| Revenues | $600,000 | |
| Cost of goods sold (all variable costs) | 300,000 | |
| Gross margin | 300,000 | |
| Operating costs: | ||
| Salaries fixed | $140,000 | |
| Sales commissions (12% of sales) | 72,000 | |
| |
10,000 | |
| Store rent ($3,500 per month) | 42,000 | |
| Other operating costs | 45,000 | 309,000 |
| Operating income (loss) | $ (9,000) |
Mr. Welch, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $30,000 variable costs, which vary with sales volume, and $15,000 (fixed) costs.
- 1. Compute the contribution margin of Welch Men’s Clothing.
Required
- 2. Compute the contribution margin percentage.
- 3. Mr. Welch estimates that he can increase units sold, and hence revenues by 25% by incurring additional advertising costs of $8,000. Calculate the impact of the additional advertising costs on operating income.
- 4. What other actions can Mr. Welch take to improve operating income?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
source for the question is in the picture
Q1. Compute the contribution margin of Welch Men’s Clothing.
Q. What other actions can Mr. Welch take to improve operating income?
3-35 Contribution margin, decision making. Welch Men’s Clothing’s revenues and cost data for 2017 areas follows:Revenues $600,000Cost of goods sold (all variable costs) 300,000Gross margin 300,000Operating costs:Salaries fixed $140,000Sales commissions (12% of sales) 72,000Depreciation of equipment and fixtures 10,000Store rent ($3,500 per month) 42,000Other operating costs 45,000 309,000Operating income (loss) $ (9,000)Mr. Welch, the owner of the store, is unhappy with the operating results. An analysis of other operatingcosts reveals that it includes $30,000 variable costs, which vary with sales volume, and $15,000 (fixed) costs.1. Compute the contribution margin of Welch Men’s Clothing.2. Compute the contribution margin percentage.3. Mr. Welch estimates that he can increase units sold, and hence revenues by 25% by incurring additionaladvertising costs of $8,000. Calculate the impact of the additional advertising costs on operatingincome.4. What other actions can Mr. Welch take to…
Chapter 3 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Jacks Jax has total fixed costs of 25,000. If the...Ch. 3 - During the current year, XYZ Company increased its...Ch. 3 - Under the contribution income statement, a...Ch. 3 - A company needs to sell 10,000 units of its only...Ch. 3 - Once a company exceeds its breakeven level,...Ch. 3 - Prob. 3.21ECh. 3 - CVP computations. Garrett Manufacturing sold...Ch. 3 - CVP analysis, changing revenues and costs. Sunset...Ch. 3 - CVP exercises. The Deli-Sub Shop owns and operates...Ch. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - CVP analysis, income taxes. Westover Motors is a...Ch. 3 - CVP analysis, income taxes. The Home Style Eats...Ch. 3 - CVP analysis, sensitivity analysis. Perfect Fit...Ch. 3 - CVP analysis, margin of safety. Suppose Morrison...Ch. 3 - Operating leverage. Cover Rugs is holding a 2-week...Ch. 3 - CVP analysis, international cost structure...Ch. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.33ECh. 3 - Prob. 3.34ECh. 3 - Contribution margin, decision making. Welch Mens...Ch. 3 - Contribution margin, gross margin, and margin of...Ch. 3 - Uncertainty and expected costs. Kindmart is an...Ch. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - CVP, target operating income, service firm....Ch. 3 - CVP analysis, margin of safety. Marketing Docs...Ch. 3 - CVP analysis, income taxes. (CMA, adapted) J.T....Ch. 3 - CVP, sensitivity analysis. The Derby Shoe Company...Ch. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - CVP analysis, shoe stores (continuation of 3-43)....Ch. 3 - Prob. 3.45PCh. 3 - Prob. 3.46PCh. 3 - CVP analysis, income taxes, sensitivity. (CMA,...Ch. 3 - Choosing between compensation plans, operating...Ch. 3 - Prob. 3.49PCh. 3 - Multiproduct CVP and decision making. Crystal...Ch. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.52PCh. 3 - Ethics, CVP analysis. Megaphone Corporation...Ch. 3 - Deciding where to produce. (CMA, adapted) Portal...
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.Similar questions
- The answers I need to be answered are 1-3 in the photo image.arrow_forward3-22 Contribution margin, decision making. (LO 2) Welch Men's Clothing's revenues and cost data for 2021 are as follows: Revenues Cost of goods sold (all variable costs) Gross margin Operating costs: Salaries fixed Sales commissions (12% of sales) Depreciation of equipment and fixtures Store rent ($3,500 per month) Other operating costs Operating income (loss) $140,000 72,000 10,000 42,000 45,000 $600,000 300,000 300,000 309,000 $ (9,000) Mr. Welch, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $30,000 variable costs, which vary with sales volume, and $15,000 (fixed) costs. Required 1. Compute the contribution margin of Welch Men's Clothing. 2. Compute the contribution margin percentage. 3. Mr. Welch estimates that he can increase units sold, and hence revenues by 25%, by incurring additional advertising costs of $8,000. Calculate the impact of the additional advertising costs on operating income. 4. What…arrow_forward1). Zen Company Income Statement For the month ended September 30, 2020 Sales $750,000 Cost of good sold Gross margin Selling and Administration expense: Selling expenses Administration expense (660,000) 90,000 20,000 10,000 (30,000) 60.000 Net operating income Zen company sell its shoes for $750 per pair. The variable expense to produce shoes is $350 per pair. The full admin cost is variable. In terms of selling expenses, the sales commission per pair is $ 5 and the remaining are the fixed salaries of sales people. Requirement a. Prepare a contribution format income statement. Find the contribution of each pair of shoes toward covering fixed cost.arrow_forward
- The contribution margin income statement of Unique Donuts for August 2024 follows: (Click the icon to view the contribution margin income statement.) Data table Unique Donuts Contribution Margin Income Statement Month Ended August 31, 2024 Net Sales Revenue Variable Costs: Cost of Goods Sold Selling Costs Administrative Costs Contribution Margin Fixed Costs: Selling Costs Administrative Costs Operating Income $ 32,300 17,200 1,300 42,210 14,070 $ $ - 127,000 50,800 76,200 56,280 19,920 Requirements Unique sells two dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $3.10, with total variable cost of $1.24 per dozen. A dozen custard-filled donuts sells for $7.20, with total variable cost of $2.88 per dozen. d-filled donuts 1. Calculate the weighted-average contribution margin. 2. Determine Unique's monthly breakeven point in dozens of plain donuts and custard-filled donuts. Prove your answer by preparing a summary contribution margin income…arrow_forward.Kipling Company has sales of $1,500,000 for the first quarter of 2016. In making the sales, the company incurred the following costs and expenses. Variable Fixed Product costs $500,000 $550,000 Selling expenses 100,000 75,000 Administrative expenses 80,000 67,000 Instructions Calculate net income under CVP for 2016.arrow_forwardGiven: The annual accounting data for 2018, presented below. : 1500K$ : 1000K$ Fixed factory overhead : 300K$ Variable factory overhead: 200KS Fixed admin costs : 500K$ Variable admin costs : 250KS : 400K$ 50KS :6000K$ Direct material Direct labour Sales salaries Sales commissions Sales Revenues Required: Write an income statement for the data given above, using a) the gross margin technique, and b) the contribution margin techniquearrow_forward
- Presented here is the income statement for Big Sky Incorporated for the month of February: Sales $ 60,000 Cost of goods sold 51,900 Gross profit $ 8, 100 Operating expenses 15,200 Operating loss $ (7,100) Based on an analysis of cost behavior patterns, it has been determined that the company's contribution margin ratio is 19%. Required: Rearrange the preceding income statement to the contribution margin format. If sales increase by 10%, what will be the firm's operating income (or loss)? Calculate the amount of revenue required for Big Sky to break even.arrow_forwardContribution Margin ConceptsThe following information is taken from the 2017 records of Hendrix's Guitar Center. Fixed Variable Total Sales $1,125,000 Costs Goods sold 506,250 Labor $240,000 90,000 Supplies 3,000 7,500 Utilities 18,000 19,500 Rent 36,000 0 Advertising 9,000 36,750 Miscellaneous 9,000 15,000 Total costs $315,000 $675,000 (990,000) Net income $ 135,000 Required Determine the annual break-even dollar sales volume. Contribution margin ratio: $AnswerAnnual break-even dollar sales volumes: $Answer Determine the current margin of safety in dollars. What is the annual break-even dollar sales volume if management makes a decision that increases fixed costs by $40,000?arrow_forwardRahularrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Cost-Volume-Profit (CVP) Analysis and Break-Even Analysis Step-by-Step, by Mike Werner; Author: Accounting Step by Step;https://www.youtube.com/watch?v=D0MOfse9OWk;License: Standard Youtube License