Please answer the three questions below. Thanks! 1) Gilley, Inc., sells a single product. The company's most recent income statement is given below. Sales (4,000 units) - Variable Expenses Contribution Margin - Fixed Expenses Operating Income $ 120,000 (68,000) $ 52,000 (42,000) $ 10,000 If 10 more units are sold, profits will increase by: 2) Using the information from Gilley, Inc. above, answer the following. The marketing manager believes that sales may increase next year by 20%. Using the operating leverage and the predicted increase in sales, what will TOTAL operating income be next year if the marketing manager is correct? 3) Using the information from Gilley, Inc. above, answer the following. The CEO of Gilley believes that sales will increase to 5,000 units next year and thinks that this may be a good time to lower variable cost and increase fixed costs through some minor automation in the plant. If they go ahead with this plan, variable costs per unit will be reduced to $12 per unit, but fixed costs will increase to a total of $70,000. What is the point of indifference for these two options? If projected sales are 5,000 units, should the firm invest in the automation?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Please answer the three questions below. Thanks!
1)
Gilley, Inc., sells a single product. The company's most recent income statement is given below.
| Sales (4,000 units) - Variable Expenses Contribution Margin - Fixed Expenses Operating Income |
$ 120,000 |
If 10 more units are sold, profits will increase by:
2)
Using the information from Gilley, Inc. above, answer the following.
The marketing manager believes that sales may increase next year by 20%. Using the operating leverage and the predicted increase in sales, what will TOTAL operating income be next year if the marketing manager is correct?
3)
Using the information from Gilley, Inc. above, answer the following.
The CEO of Gilley believes that sales will increase to 5,000 units next year and thinks that this may be a good time to lower variable cost and increase fixed costs through some minor automation in the plant. If they go ahead with this plan, variable costs per unit will be reduced to $12 per unit, but fixed costs will increase to a total of $70,000. What is the point of indifference for these two options?
If projected sales are 5,000 units, should the firm invest in the automation?
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