P5-3A Dousmann Corp.'s sales slumped badly in 2014. For the first time in its history, itoperated at a loss. The company's income statement showed the following results fromselling 500,000 units of product: sales $2,500,000; total costs and expenses $2,600,000; andnet loss $100,000. Costs and expenses consisted of the amounts shown below.TotalVariableFixedCost of goods soldSelling expensesAdministrative expenses$2,140,000250,000210,000$1,540,00092,00068,000$600,000158,000142,000$2,600,000$1,700,000$900,000Management is considering the following independent alternatives for 2015.1. Increase unit selling price 20% with no change in costs, expenses, and sales volume.2. Change the compensation of salespersons from fixed annual salaries totaling $150,000to total salaries of $60,000 plus a 5% commission on sales. E5-14 Naylor Company had $210,000 of net income in 2013 when the selling price perunit was $150, the variable costs per unit were $90, and the fixed costs were $570,000.Management expects per unit data and total fixed costs to remain the same in 2014. Thepresident of Naylor Company is under pressure from stockholders to increase net incomeby $52,000 in 2014.Instructions(a) Compute the number of units sold in 2013.(b) Compute the number of units that would have to be sold in 2014 to reach the stock-holders' desired profit level.(c) Assume that Naylor Company sells the same number of units in 2014 as it did in 2013.What would the selling price have to be in order to reach the stockholders' desiredprofit level?

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E5-14 Naylor Company had $210,000 of net income in 2013 when the selling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per unit data and total fixed costs to remain the same in 2014. The president of Naylor Company is under pressure from stockholders to increase net income by $52,000 in 2014. Instructions (a) Compute the number of units sold in 2013. (b) Compute the number of units that would have to be sold in 2014 to reach the stock- holders' desired profit level. (c) Assume that Naylor Company sells the same number of units in 2014 as it did in 2013. What would the selling price have to be in order to reach the stockholders' desired profit level?

E5-14 Naylor Company had $210,000 of net income in 2013 when the selling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per unit data and total fixed costs to remain the same in 2014. The president of Naylor Company is under pressure from stockholders to increase net income by $52,000 in 2014. Instructions (a) Compute the number of units sold in 2013. (b) Compute the number of units that would have to be sold in 2014 to reach the stock- holders' desired profit level. (c) Assume that Naylor Company sells the same number of units in 2014 as it did in 2013. What would the selling price have to be in order to reach the stockholders' desired profit level?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter9: Operating Activities

Section: Chapter Questions

Problem 20PC: A large manufacturer of truck and car tires recently changed its cost-flow assumption method for...

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A large manufacturer of truck and car tires recently changed its cost-flow assumption method for inventories at the beginning of 2014. The manufacturer has been in operation for almost 40 years, and for the last decade it has reported moderate growth in revenues. The firm changed from the LIFO method to the FIFO method and reported the following information (amounts in millions): REQUIRED Calculate the inventory turnover ratio for 2014 using the LIFO and FIFO cost-flow assumption methods. Explain why the costs assigned to inventory under LIFO at the end of 2013 and 2014 are so much less than they are under FIFO.
P5-3A Dousmann Corp.’s sales slumped badly in 2014. For the fi rst time in its history, it operated at a loss. The company’s income statement showed the following results from selling 500,000 units of product: sales $2,500,000; total costs and expenses $2,600,000; and net loss $100,000. Costs and expenses consisted of the amounts shown below. Total Variable Fixed Cost of good sold 2140000 1540000 600000 Selling expense 250000 92000 158000 Administrative expenses 210000 68000 142000 2600000 1700000 900000 Management is considering the following independent alternatives for 2015. Increase unit selling price 20% with no change in costs, expenses, and sales volume. Change the compensation of salespersons from fi xed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales. Instructions Compute the break-even point in dollars for 2014. Compute the break-even point in dollars under each of…
Tanek Corp.’s sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 590,500 units of product: sales $2,952,500, total costs and expenses $3,050,875, and net loss $98,375. Costs and expenses consisted of the amounts shown below. Total Variable Fixed Cost of goods sold $2,507,615 $2,025,415 $482,200 Selling expenses 295,250 108,652 186,598 Administrative expenses 248,010 80,308 167,702 $3,050,875 $2,214,375 $836,500 Management is considering the following independent alternatives for 2018. 1. Increase unit selling price 25% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $177,150 to total salaries of $70,860 plus a 5% commission on sales. (a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places,…
E5-14 Naylor Company had $210,000 of net income in 2013 when the selling price perunit was $150, the variable costs per unit were $90, and the fi xed costs were $570,000.Management expects per unit data and total fi xed costs to remain the same in 2014. Thepresident of Naylor Company is under pressure from stockholders to increase net incomeby $52,000 in 2014.Instructions(a) Compute the number of units sold in 2013. (b) Compute the number of units that would have to be sold in 2014 to reach the stock-holders’ desired profi t level. (c) Assume that Naylor Company sells the same number of units in 2014 as it did in 2013.What would the selling price have to be in order to reach the stockholders’ desired profit level?
Midlands Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 80,000 units of product: net sales $2,000,000; total costs and expenses $2,235,000; and net loss $235,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,568,000 $1,050,000 $518,000 Selling expenses 517,000 92,000 425,000 Administrative expenses 150,000 58,000 92,000 $2,235,000 $1,200,000 $1,035,000 Management is considering the following independent alternatives for 2022. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,000 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50
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P5-5A Profitability Analysis Kolby Enterprise reports the following information on its income statement: net sales 250,000, cost of goods sold 150,000, selling expenses 50,000, Administrative expenses 10,000, other income 15,000, other expense 10,000. Required Calculate Kolby's gross profit percentage and return on sales ratio. Explain what each ratio tells us about Kolby's performance. Kolby is planning to add a new product and expects net sales to be $45,000 and cost of goods to be 38,000. No other income or expand are expected to change. How will this affect Kolby's gross profit percentage and return on sales ratio? What do you advise regarding the new product offering?
For 20Y2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president, is presented with the following condensed comparative income Statement: McDade CompanyComparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales.......................... $16,800,000 $15,000,000 Cost of goods sold.............. 11,500,000 10,000,000 Gross profit.................... $ 5,300,000 $ 5,000,000 Selling expenses............... $ 1,770,000 $ 1,500,000 Administrative expenses........ 1,220,000 $ 1,000,000 Total operating expenses....... $ 2,990,000 $ 2,500,000 Income from operations........ $ 2,310,000 $ 2,500,000 Other revenue................. 256,950 225,000 Income before income tax...... $ 2,566,950 $ 2,725,000 Income tax expense............ 1,413,000 1,500,000 Net income.................... $ 1,153,950 $ 1,225,0000 Instructions1. Prepare a comparative income statement with horizontal analysis for the…
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