Required information[The following information applies to the questions displayed below.)Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (therelevant range of production is 500 units to 1,500 units):SalesVariable expensesContribution margin:Fixed expensesNet operating income:$ 80,00052,00028,00021,848$ 6,16015. Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words,assume that the total variable expenses are $21,840 and the total fixed expenses are $52,000. Using the degree of operatingleverage, what is the estimated percent increase in net operating income of a 5% increase in unit sales? (Round your intermediatecalculations and final answer to 2 decimal places.)Increase in net operating income

It is the measure that indicates the sensitity of the fixed cost on the project. The degree of…

Answered: Oslo Company prepared the following…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6PA: Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating...

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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.
A company has prepared the following statistics regarding its production and sales at different capacity levels. Total costs: 1. At what point is break-even reached in sales dollars? In units? (Hint: Use the capacity level to determine the number of units.) 2. If the company is operating at 60% capacity, should it accept an offer from a customer to buy 10,000 units at 3 per unit?
The production of a new product required Zion Manufacturing Co. to lease additional plant facilities. Based on studies, the following data have been made available: Estimated annual sales24,000 units Selling expenses are expected to be 5% of sales, and net income is to amount to 2.00 per unit. Required: 1. Calculate the selling price per unit. (Hint: Let X equal the selling price and express selling expense as a percentage of X.) 2. Prepare an absorption costing income statement for the year ended December 31, 2016. 3. Calculate the break-even point expressed in dollars and in units, assuming that administrative expense and factory overhead are all fixed but other costs are fully variable.
Use the following information for Multiple-Choice Questions 2-3 and 2-4: Wachman Company produces a product with the following per-unit costs: Last year, Wachman produced and sold 2,000 units at a price of 75 each. Total selling and administrative expense was 30,000. 2-3Refer to the information for Wachman Company on the previous page. Conversion cost per unit was a. 21. b. 25. c. 34. d. 40. e. None of these.
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.
The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
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.
Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for 25 per unit. Each quarter, 2,000 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: No significant non-unit-level costs are incurred. Morrill is considering two alternatives to supply the productive capacity for the subassembly. 1. Lease the needed space and equipment at a cost of 27,000 per quarter for the space and 10,000 per quarter for a supervisor. There are no other fixed expenses. 2. Drop the thickness gauge. The equipment could be adapted with virtually no cost and the existing space utilized to produce the subassembly. The direct fixed expenses, including supervision, would be 38,000, 8,000 of which is depreciation on equipment. If the thickness gauge is dropped, sales of the density gauge will not be affected. Required: 1. Should Morrill Company make or buy the subassembly? If it makes the subassembly, which alternative should be chosen? Explain and provide supporting computations. 2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What effect does this have on the decision? 3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 2,800 subassemblies are required per quarter. As before, assume that there are no ending inventories of subassemblies and that all units produced are sold. Assume also that the per-unit sales price and variable costs are the same as in Requirement 1. Include the leasing alternative in your consideration. Now, what is the correct decision?
The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the year ended December 31: Assume that 8,500 million of cost of goods sold and 4,000 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows: Also, assume that 30% of the beginning and ending inventories were fixed costs. a. Prepare an income statement according to the variable costing concept for Caterpillar Inc. Round numbers to nearest million. b. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts. Round numbers to nearest million.
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.
Use the following information for Multiple-Choice Questions 2-13 through 2-18: Last year, Barnard Company incurred the following costs: Barnard produced and sold 10,000 units at a price of 31 each. 2-13Refer to the information for Barnard Company above. Prime cost per unit is a. 7.00. b. 20.00. c. 15.00. d. 5.00. e. 27.60.
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales$ 55,000Variable expenses33,000Contribution margin22,000Fixed expenses14,960Net operating income$ 7,04015. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $14,960 and the total fixed expenses are $33,000. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in unit sales? (Round your intermediate calculations and final answer to 2 decimal places.)

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Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales Variable expenses Contribution margin: Fixed expenses Net operating incone $ 80,000 52,000 28,000 21,848 $ 6,160