2. Refer to the income statements in Requirement (1) above. For both present operations and the proposed new operations, Compute:a. The degree of operating leverage.Degree of operating leverageb. The break-even point in dollars.Dollar sales to breakevenPresentMargin of safety in dollarsMargin of safety in percentagePresentProposedc. The margin of safety in both dollar and percentage terms.PresentProposed%Proposed%< Prev14 of 14 8:028Next > Frieden Company's contribution format income statement for the most recent month is given below:Sales (41,000 units)Variable expensesContribution marginFixed expensesNet operating income.$ 820,000574,000246,000196,800$ 49,200The industry in which Frieden Company operates is quite sensitive to cyclical movements in the economy. Thus, profits varyconsiderably from year to year according to general economic conditions. The company has a large amount of unused capacity and isstudying ways of improving profits.Required:1. New equipment has come on the market that would allow Frieden Company to automate a pation of its operations. Variableexpenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $442,800 each month. Preparetwo contribution format income statements: one showing present operations, and one showing how operations would appear if thenew equipment were purchased. (Input all amounts as positive values except losses which should be indicated by minus sign.Round your "Per unit" answers to 2 decimal places.)$Amount00PresentPer Unit$0.00Percentage%%0%$Amount00ProposedPer Unit$0.00Percentage%%0%

Name: 2. Refer to the income statements in Requirement (1) above. For both
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Description: 2. Refer to the income statements in Requirement (1) above. For both present operations and the proposed new operations, Compute:a. The degree of operating leverage.Degree of operating leverageb. The break-even point in dollars.Dollar sales to break

Break-even point: The break-even point refers to a point where the total cost is equal to the total…

Business

Accounting

Frieden Company's contribution format income statement for the most recent month is given below: Sales (41,000 units) Variable expenses Contribution margin Fixed expenses Net operating income. $ 820,000 574,000 246,000 196,800 $ 49,200 The industry in which Frieden Company operates is quite sensitive to cyclical movements in the economy. Thus, profits considerably from year to year according to general economic conditions. The company has a large amount of unused studying ways of improving profits. Required: 1. New equipment has come on the market that would allow Frieden Company to automate a pation of its operations. V expenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $442,800 each mc two contribution format income statements: one showing present operations, and one showing how operations would a new equipment were purchased. (Input all amounts as positive values except losses which should be indicated by mi Round your "Per unit" answers to 2 decimal places.) Amount Present Per Unit Percentage Amount Proposed Per Unit Perc

Frieden Company's contribution format income statement for the most recent month is given below: Sales (41,000 units) Variable expenses Contribution margin Fixed expenses Net operating income. $ 820,000 574,000 246,000 196,800 $ 49,200 The industry in which Frieden Company operates is quite sensitive to cyclical movements in the economy. Thus, profits considerably from year to year according to general economic conditions. The company has a large amount of unused studying ways of improving profits. Required: 1. New equipment has come on the market that would allow Frieden Company to automate a pation of its operations. V expenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $442,800 each mc two contribution format income statements: one showing present operations, and one showing how operations would a new equipment were purchased. (Input all amounts as positive values except losses which should be indicated by mi Round your "Per unit" answers to 2 decimal places.) Amount Present Per Unit Percentage Amount Proposed Per Unit Perc

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 40P

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Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: It is expected that 12,000 units will be sold at a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to one decimal place.) 6. Determine the operating leverage.
Wellington, Inc., reports the following contribution margin income statement for the month of May. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $10 but will increase fixed costs by 20%. Prepare a projected contribution margin income statement for Wellington, Inc., assuming it purchases the new equipment. Assume sales level remains unchanged.
Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.
Markham Farms reports the following contribution margin income statement for the month of August. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $2 but will increase fixed costs by 15%. Prepare a projected contribution margin income statement for Markham Farm assuming it purchases the new equipment. Assume sales level remains unchanged.
Cost-Volume-Profit, Margin of Safety Victoria Company produces a single product. Last years income statement is as follows: Required: 1. Compute the break-even point in units and sales dollars calculated using the break-even units. 2. What was the margin of safety for Victoria last year in sales dollars? 3. Suppose that Victoria is considering an investment in new technology that will increase fixed cost by 250,000 per year but will lower variable costs to 45% of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming that Victoria makes this investment. What is the new break-even point in sales dollars, assuming that the investment is made?
Wallace Industries has total contribution margin of $58,560 and net income of $24,400 for the month of April. Wallace expects sales volume to increase by 5% in May. What are the degree of operating leverage and the expected percent change in income for Wallace Industries? 0.42 and 2.2% 0.42and5% 2.4andl2% 2.Sandl3%
West Island distributes a single product. The companys sales and expenses for the month of June are shown. Using the information presented, answer these questions: A. What is the break-even point in units sold and dollar sales? B. What is the total contribution margin at the break-even point? C. If West Island wants to earn a profit of $21,000, how many units would they have to sell? D. Prepare a contribution margin income statement that reflects sales necessary to achieve the target profit.
The sales price per unit is 13 for the Voyageur Companys only product. The variable cost per unit is 5. In 2016, the company sold 80,000 units, which was 10,000 units above the break-even point. Compute the following: 1. Total fixed expenses. (Hint: First compute the contribution margin per unit.) 2. Total variable expense at the break-even volume.
Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects to sell 28,700 units at 32 each. Kallings controller provided the following information for the coming year: Required: 1. Calculate the cost of one unit of product under absorption costing. 2. Calculate the cost of one unit of product under variable costing. 3. Calculate operating income under absorption costing for next year. 4. Calculate operating income under variable costing for next year.
Bolger and Co. manufactures large gaskets for the turbine industry. Bolgers per-unit sales price and variable costs for the current year are as follows: Bolgers total fixed costs aggregate to 360,000. Bolgers labor agreement is expiring at the end of the year, and management is concerned about the effects of a new labor agreement on its break-even point in units. The controller performed a sensitivity analysis to ascertain the estimated effect of a 10-per-unit direct labor increase and a 10,000 reduction in fixed costs. Based on these data, the break-even point would: a. decrease by 1,000 units. b. decrease by 125 units. c. increase by 375 units. d. increase by 500 units.
Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true? a. Sales will increase by 300,000. b. Overall operating income will increase by 2,600. c. Overall operating income will decrease by 25,000. d. Overall operating income will not change. e. Common fixed cost will decrease by 27,600.
Ellerson Company provided the following information for the last calendar year: During the year, direct materials purchases amounted to 278,000, direct labor cost was 189,000, and overhead cost was 523,000. During the year, 100,000 units were completed. Refer to Exercise 2.21. Last calendar year, Ellerson recognized revenue of 1,312,000 and had selling and administrative expenses of 204,600. Required: 1. What is the cost of goods sold for last year? 2. Prepare an income statement for Ellerson for last year.