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Business Accounting ACC 202 Principles of Accounting 2 Ball State University

Gross Margin: Gross margin is derived when cost of goods sold subtracted from sales revenue. To determine: Gross margin Solution: Gross Margin = $6000 Traditional format income statement Particulars Amount Amount Sales $12,000 Less: Cost of goods sold $6,000 Gross margin $6,000 Less: Selling and administration expenses Selling $3,400 Administration $1,900 $5,300 Net operating income $700 Contribution income format statement Particulars Amount Amount Sales $12,000 Less: Variable expenses Cost of goods sold $6,000 Variable Selling $900 Variable administration $400 $7,300 Contribution margin $4,700 Less: Fixed expenses Fixed selling $2,500 Fixed administration $1,500 $4,000 Net operating income $700 No, gross margin has not changed, it appears as same in the Exhibit 1-7, because variable selling expense increase not affect the gross margin, only cost of goods increase could make changes in gross margin. Formula: T r a d i t i o n a l f o r m a t i n c o m e s t a t e m e n t = S a l e s − c o s t o f g o o d s s o l d = G r o s s m a r g i n . G r o s s m a r g i n − s e l l i n g e x p e n s e − a d m i n i s t r a t i o n e x p e n s e = N e t o p e r a t i n g i n c o m e . C o n t r i b u t i o n f o r i n c o m e s t a t e m e n t = S a l e s – c o s t o f g o o d s s o l d – v a r i a b l e s e l l i n g e x p e n s e s – v a r i a b l e a d m i n i s t r a t i o n e x p e n s e s = C o n t r i b u t i o n m a r g i n − f i x e d s e l l i n g e x p e n s e – f i x e d a d m i n i s t r a t i o n e x p e n s e s = N e t o p e r a t i n g i n c o m e . Explanations: Gross margin = $6000. Gross margin could derive after deducting cost of goods sold from sales revenue; cost of goods sold is a direct expense for manufacturing the sold goods by the company. Only traditional income format statement has gross margin because it wouldn’t include variable as well as fixed expenses. Contribution for income statement not having gross margin, it has only contribution margin, it derived after deducting cost of goods sold and other variable expenses from the sales revenue. Conclusion: Above explanations stated that the gross margin derived only in traditional format income statement.

Gross Margin: Gross margin is derived when cost of goods sold subtracted from sales revenue. To determine: Gross margin Solution: Gross Margin = $6000 Traditional format income statement Particulars Amount Amount Sales $12,000 Less: Cost of goods sold $6,000 Gross margin $6,000 Less: Selling and administration expenses Selling $3,400 Administration $1,900 $5,300 Net operating income $700 Contribution income format statement Particulars Amount Amount Sales $12,000 Less: Variable expenses Cost of goods sold $6,000 Variable Selling $900 Variable administration $400 $7,300 Contribution margin $4,700 Less: Fixed expenses Fixed selling $2,500 Fixed administration $1,500 $4,000 Net operating income $700 No, gross margin has not changed, it appears as same in the Exhibit 1-7, because variable selling expense increase not affect the gross margin, only cost of goods increase could make changes in gross margin. Formula: T r a d i t i o n a l f o r m a t i n c o m e s t a t e m e n t = S a l e s − c o s t o f g o o d s s o l d = G r o s s m a r g i n . G r o s s m a r g i n − s e l l i n g e x p e n s e − a d m i n i s t r a t i o n e x p e n s e = N e t o p e r a t i n g i n c o m e . C o n t r i b u t i o n f o r i n c o m e s t a t e m e n t = S a l e s – c o s t o f g o o d s s o l d – v a r i a b l e s e l l i n g e x p e n s e s – v a r i a b l e a d m i n i s t r a t i o n e x p e n s e s = C o n t r i b u t i o n m a r g i n − f i x e d s e l l i n g e x p e n s e – f i x e d a d m i n i s t r a t i o n e x p e n s e s = N e t o p e r a t i n g i n c o m e . Explanations: Gross margin = $6000. Gross margin could derive after deducting cost of goods sold from sales revenue; cost of goods sold is a direct expense for manufacturing the sold goods by the company. Only traditional income format statement has gross margin because it wouldn’t include variable as well as fixed expenses. Contribution for income statement not having gross margin, it has only contribution margin, it derived after deducting cost of goods sold and other variable expenses from the sales revenue. Conclusion: Above explanations stated that the gross margin derived only in traditional format income statement.

ACC 202 Principles of Accounting 2 Ball State University

ACC 202 Principles of Accounting 2 Ball State University

15th Edition

ISBN: 9781308193977

Author: Noreen, Brewer Garrison

Publisher: MCG/CREATE

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Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. …

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ACC 202 Principles of Accounting 2 Ball State University

Ch. 2.A - Prob. 1E Ch. 2.A - Prob. 2E Ch. 2.A - Prob. 3P Ch. 2.A - Prob. 4P Ch. 2.A - Prob. 5C Ch. 2.B - Prob. 1E Ch. 2.B - Prob. 2E Ch. 2.B - Prob. 3P Ch. 2.B - Prob. 4P Ch. 2 - Prob. 1Q

Ch. 2 - Define the following: (a) direct materials, (b)...Ch. 2 - Explain the difference between a product cost and...Ch. 2 - Distinguish between (a) a variable cost, (b) a...Ch. 2 - Prob. 5Q Ch. 2 - Define the following terms: (a) cost behavior and...Ch. 2 - What is meant by an activity base when dealing...Ch. 2 - Managers often assume a strictly linear...Ch. 2 - Distinguish between discretionary fixed costs and...Ch. 2 - Does the concept of the relevant range apply to...Ch. 2 - What is the major disadvantage of the high-low...Ch. 2 - Prob. 12Q Ch. 2 - Prob. 13Q Ch. 2 - What is the difference between a traditional...Ch. 2 - Prob. 15Q Ch. 2 - Prob. 16Q Ch. 2 - Prob. 17Q Ch. 2 - Prob. 1AE Ch. 2 - Prob. 2AE Ch. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - Prob. 1F15 Ch. 2 - L012, L013, L014, L015, L016 Martinez Company’s...Ch. 2 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6 Martinez...Ch. 2 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - EXERCISE 1—1 Identifying Direct and Indirect Costs...Ch. 2 - EXERCISE 1-2 Classifying Manufacturing Costs LO1-2...Ch. 2 - EXERCISE 1-3 Classifying Costs as Product or...Ch. 2 - EXERCISE 14 Fixed and Variable Cost Behavior LO14...Ch. 2 - Prob. 5E Ch. 2 - EXERCISE 1—6 Traditional and Contribution Format...Ch. 2 - Prob. 7E Ch. 2 - Prob. 8E Ch. 2 - Prob. 9E Ch. 2 - Prob. 10E Ch. 2 - Prob. 11E Ch. 2 - EXERCISE 1-12 Product and Period Cost Flows LO1–3...Ch. 2 - Prob. 13E Ch. 2 - EXERCISE 2-14 High-Low Method: Predicting Cost...Ch. 2 - Prob. 15E Ch. 2 - Prob. 16P Ch. 2 - Prob. 17P Ch. 2 - PROBLEM 1-18 Direct and Indirect Costs; variable...Ch. 2 - Prob. 19P Ch. 2 - PROBLEM 2-20 High-Low Method; Predicting Cost...Ch. 2 - PROBLEM 2-21 Cost Classification [L02-1, L02-3,...Ch. 2 - Prob. 22P Ch. 2 - Prob. 23P Ch. 2 - Prob. 24P Ch. 2 - Prob. 25P Ch. 2 - Prob. 26C Ch. 2 - Prob. 27C

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