Required 1Required 2 Required 3 Required 4Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degreeof operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safetypercentage. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (l.e. .1234 shouldbe entered as 12.34).)PresentProposeda. Degree of operating leverageb. Break-even point in dollar salesc. Margin of safety in dollarsMargin of safety in percentageRequired 1Required 2 Required 3 Required 4Refer again to the data in (1). As a manager, what factor would be paramount in your mind in deciding whether to purchasethe new equipment? (Assume that enough funds are available to make the purchase.)Ocyclical movements in the economyOReserves and surplus of the companyOPerformanoce of peers in the industryOStock level maintainedRequired 1Roquirad 2 Roquirad 3 Roaquired 4Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company'smarketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses,the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claimsthis new approach would increase unit sales by 30% without any change in selling price; the company's new monthly fixedexpenses would be $495,558; and its net operating income would increase by 20%. Compute the company's break-even pointin dollar sales under the new marketing strategy, (Do not round intermediate calculations. Round your answer to the nearestwhole dollar amount.)Show less ANew break even point in dolar ales Morton Company's contribution format income statement for last month is given below.Sales (46,000 units x $21 per unit)Variable expensesContribution marginFixed expenses$ 966,000676, 200289, 890231, 840Net operating incone$ 57,960The industry in which Morton 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.Complete this question by entering your answers in the tabs below.Requlred 1 Requlred 2 Required 3 Required 4New equipment has come onto the market that would alow Morton Company to automate a portion of ts operations. Varible expenses would be reduced by$6.30 per unt. Hovever fived expenses would increase to a ota of $2,64 each month. Preare two contributon format income statements, one showingpresent operations and one showing how operations would appear i the new equipment is purchased. (Round "Per Unt" to 2 decimal places,.)Show less aMorton CompanyContribution Income StatementPresentProposedAmountPer Unit%AmountPer Unit%%%

Contribution will be calculated by deducting the variable cost from the sales. It will cover the…

Morton Company's contribution format income statement for last month is given below. Sales (46,809 units × $21 per unit) Variable expenses Contribution nargin Fixed expenses $ 96,000 676, 200 289, 890 231,840 Net operating income $ 57,960 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

Morton Company's contribution format income statement for last month is given below. Sales (46,809 units × $21 per unit) Variable expenses Contribution nargin Fixed expenses $ 96,000 676, 200 289, 890 231,840 Net operating income $ 57,960 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

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 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Similar questions

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%
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.
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?
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.
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.
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.
Macom Manufacturing has total contribution margin of $61,250 and net income of $24,500 for the month of June. Marcus expects sales volume to increase by 10% in July. What are the degree of operating leverage and the expected percent change in income for Macom Manufacturing? 0.4 and 10% 2.5 and 10% 2.5 and 25% 5.0 and 50%
During the current year, Plainfield Manufacturing earned income of $845,000 from total sales of $9,350,000 and average capital assets of $13,500,000. Using the sales margin from the previous exercise, what is the total ROI for the company during the current year?
Starling Co. manufactures one product with a selling price of 18 and variable cost of 12. Starlings total annual fixed costs are 38,400. If operating income last year was 28,800, what was the number of units Starling sold? a. 4,800 b. 6,400 c. 5,600 d. 11,200
During the current year, Sokowski Manufacturing earned income of $350,000 from total sales of $5,500,000 and average capital assets of $12,000,000. A. Based on this information, calculate asset turnover. B. Using the sales margin from the previous exercise, what is the total ROI for the company during the current year?
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.
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.