Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada.The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgetedincome statement for the fiscal year ending June 30, 2019:SalesCost of goods soldVariableFixedGross profitSelling and administrative costsCommissions.Lionel CorporationBudgeted Income StatementFor the Year Ending June 30, 2019($000 omitted)Fixed advertising costFixed administrative costOperating incomeFixed interest cost.Income before income taxes.Income taxes (308)Net income$ 13,3203,552$ 5,3288882,368SalesVariable costs:Since the completion of the income statement, Lionel has learned that its sales agents are requiring a 5% increase in their commissionrate (to 23%) for the upcoming year. As a result, Lionel's president has decided to investigate the possibility of hiring its own sales staffin place of the network of sales agents and has asked Alan Chen, Lionel's controller, to gather information on the costs associated withthis change.Fixed costs:Alan estimates that Lionel must hire eight salespeople to cover the current market area, at an average annual payroll cost for eachemployee of $80,000, including fringe benefits expense. Travel and entertainment expenses is expected to total $710,000 for the year,and the annual cost of hiring a sales manager and sales secretary will be $205,000. In addition to their salaries, the eight salespeoplewill each earn commissions at the rate of 10% of sales. The president believes that Lionel also should increase its advertising budgetby $610,000 if the eight salespeople are hired.Required1. Determine Lionel's breakeven point (operating profit = 0) in sales dollars for the fiscal year ending June 30, 2019, if the companyhires its own sales force and increases its advertising costs. Prove this by constructing a contribution income statement.2. If Lionel continues to sell through its network of sales agents and pays the higher commission rate, determine the estimated volumein sales dollars that would be required to generate the operating profit as projected in the budgeted income statement.Contribution Income StatementComplete this question by entering your answers in the tabs below.$29,600Required 1 Required 2Determine Lionel's breakeven point (operating profit = 0) in sales dollars for the fiscal year ending June 30, 2019, if thecompany hires its own sales force and increases its advertising costs. Prove this by constructing a contribution incomestatement. (Do not round intermediate calculations. Enter your answers in thousands of dollars.)Breakeven point (in sales dollars)16,872$ 12,728

An income statement stands for the statement that shows profits and loss of the firm, its revenue…

Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019:

Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019:

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 10CE: Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects...

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Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of 15.9 million and cost of goods sold of 8.75 million. Advertising is a key part of Coral Seas business strategy, and total marketing expense for the year is budgeted at 2.8 million. Total administrative expenses are expected to be 675,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income. Required: 1. Construct a budgeted income statement for Coral Seas Jewelry Company for the coming year. 2. What if Coral Seas had interest payments of 500,000 during the year? What effect would that have on operating income? On income before taxes? On net income?
Greiner Company makes and sells high-quality glare filters for microcomputer monitors. John Craven, controller, is responsible for preparing Greiners master budget and has assembled the following data for the coming year. The direct labor rate includes wages, all employee-related benefits, and the employers share of FICA. Labor saving machinery will be fully operational by March. Also, as of March 1, the companys union contract calls for an increase in direct labor wages that is included in the direct labor rate. Greiner expects to have 5,600 glare filters in inventory on December 31 of the current year, and has a policy of carrying 35 percent of the following month's projected sales in inventory. Information on the first four months of the coming year is as follows: Required: 1. Prepare the following monthly budgets for Greiner Company for the first quarter of the coming year. Be sure to show supporting calculations. a. Production budget in units b. Direct labor budget in hours c. Direct materials cost budget d. Sales budget 2. Calculate the total budgeted contribution margin for Greiner Company by month and in total for the first quarter of the coming year. Be sure to show supporting calculations. (CMA adapted)
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Nozama.com Inc. sells consumer electronics over the Internet. For the next period, the budgeted cost of the sales order processing activity is 250,000 and 50,000 sales orders are estimated to be processed. a. Determine the activity rate of the sales order processing activity. b. Determine the amount of sales order processing cost associated with 30,000 sales orders.
Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019: Lionel Corporation Budgeted Income Statement For the Year Ending June 30, 2019 ($000 omitted) Sales $ 29,100 Cost of goods sold Variable $ 13,095 Fixed 3,492 16,587 Gross profit $ 12,513 Selling and administrative costs Commissions $ 5,238 Fixed advertising cost 873 Fixed administrative cost 2,328 8,439 Operating income $ 4,074 Fixed interest cost 728 Income before income taxes $ 3,346 Income taxes (30%) 1,004 Net income $ 2,342 Since the completion of the income statement, Lionel has learned that its…
CVP Analysis; Commissions; Ethics Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019: Lionel Corporation Budgeted Income Statement For the Year Ending June 30, 2019 ($000 omitted) Sales $28,500 Cost of goods sold Variable $12,825 Fixed 3,500 16,325 Gross profit $12,175 Selling and administrative costs Commissions $ 5,130 Fixed advertising cost 800 Fixed administrative cost 2,150 8,080 Operating income $ 4,095 Fixed interest cost 705 Income before income taxes $ 3,390 Income taxes (30%) 1,017 Net income $ 2,373 Since the completion of the income statement,…
CVP Analysis; Commissions; Ethics Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019: Lionel Corporation Budgeted Income Statement For the Year Ending June 30, 2019 ($000 omitted) Sales $28,500 Cost of goods sold Variable $12,825 Fixed 3,500 16,325 Gross profit $12,175 Selling and administrative costs Commissions $ 5,130 Fixed advertising cost 800 Fixed administrative cost 2,150 8,080 Operating income $ 4,095 Fixed interest cost 705 Income before income taxes $ 3,390 Income taxes (30%) 1,017 Net income $ 2,373 Since the completion of the income statement,…
CVP Analysis; Commissions; Ethics Lionel Corporation manufactures pharmaceutical productssold through a network of sales agents in the United States and Canada. The agents are currently paidan 18% commission on sales; that percentage was used when Lionel prepared the following budgetedincome statement for the fiscal year ending June 30, 2019:Lionel CorporationBudgeted Income StatementFor the Year Ending June 30, 2019($000 omitted)Sales $28,500Cost of goods soldVariable $12,825Fixed 3,500 16,325Gross profit $12,175Selling and administrative costsCommissions $ 5,130Fixed advertising cost 800Fixed administrative cost 2,150 8,080Operating income $ 4,095Fixed interest cost 705Income before income taxes $ 3,390Income taxes (30%) 1,017Net income $ 2,373Since the completion of the income statement, Lionel has learned that its sales agents are requiring a 5% increase in their commission rate (to 23%) for the upcoming year. As a result, Lionel’spresident has decided to investigate the…
Gamma Ltd. manufactures and sells two products, Ago and Bago. In July 2019 Gamma’sBudget Department gathered the following data in order to prepare the individual budgets in the master budget for 2020:2020 Projected Sales :Product Unit Price Abba 90,000 $ 180 Baba 70,000 $ 250 2020 Inventories in Units: Target:Product January 1, 2020 December 31, 2020Abba 21,000 25,000 Baba 10,000 11,000To produce 1 unit of Ago and Bago, the following direct materials are used: Direct Material Unit Ago Bago A Pounds 5 6 B Pounds 3 4 C Each 0 1 Projected data for 2020 with respect to direct materials are as follows: Direct Material Purchase Price: Target Inventories January 1, 2020 December 31, 2020 A $14 32,000 pounds 35,000 pounds B $ 6 27,000 pounds 30,000 pounds C $ 4 6,000 units 7,000 units Projected direct manufacturing labor requirements and rates for 2020 are as follows: Product Hours Per Unit Rate per Hour Ago 4 $15Bago 5 $19Manufacturing overhead is allocated at the rate of $20 per…
Gamma Ltd. manufactures and sells two products, Ago and Bago. In July 2019 Gamma’sBudget Department gathered the following data in order to prepare the individual budgets in the master budget for 2020: 2020 Projected Sales :Product Unit Price Abba 90,000 $ 180 Baba 70,000 $ 250 2020 Inventories in Units: Target: Product January 1, 2020 December 31, 2020Abba 21,000 25,000 Baba 10,000 11,000To produce 1 unit of Ago and Bago, the following direct materials are used: Direct Material Unit Ago Bago A Pounds 5 6 B Pounds 3 4 C Each 0 1 Projected data for 2020 with respect to direct materials are as follows: Direct Material Purchase Price: Target Inventories January 1, 2020 December 31, 2020 A $14 32,000 pounds 35,000 pounds B $ 6 27,000 pounds 30,000 pounds C $ 4 6,000 units 7,000 units Projected direct manufacturing labor requirements and rates for 2020 are as follows: Product Hours Per Unit Rate per Hour Ago 4 $15Bago 5 $19Manufacturing overhead is allocated at the rate of $20 per…
Gamma Ltd. manufactures and sells two products, Ago and Bago. In July 2019 Gamma’s Budget Department gathered the following data in order to prepare the individual budgets inthe master budget for 2020: 2020 Projected Sales : Product Unit PriceAbba 90,000 $ 180Baba 70,000 $ 250 2020 Inventories in Units: Target: Product January 1, 2020 December 31, 2020 Abba 21,000 25,000 Baba 10,000 11,000 To produce 1 unit of Ago and Bago, the following direct materials are used: Direct Material Unit Ago Bago A Pounds 5…
Makers Ltd. manufactures and sells two products, Abba and Baba. In July 2018 Makers’Budget Department gathered the following data in order to prepare the individual budgets inthe master budget for 2019:2019 Projected Sales:Product Unit PriceAbba 80,000 $ 190Baba 60,000 $ 2702019 Inventories in Units:Expected Target:Product January 1, 2019 December 31, 2019Abba 22,000 26,000Baba 9,000 10,000To produce 1 unit of Abba and Baba, the following direct materials are used:Direct Material Unit Abba BabaA Pounds 5 6B Pounds 3 4C Each 0 1Projected data for 2019 with respect to direct materials are as follows:Direct Material Purchase Price:Target Inventories January 1, 2019 December 31, 2019A $14 33,000 pounds 37,000 poundsB $ 6 28,000 pounds 30,000 poundsC $ 4 6,000 units 7,000…