Financial & Managerial Accounting
13th Edition
ISBN: 9781285866307
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 20, Problem 20.3CP
To determine
Contribution Margin
Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting the variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin.
To Interpret: The report and provide recommendations to the two salespersons for improving profitability.
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Check out a sample textbook solutionChapter 20 Solutions
Financial & Managerial Accounting
Ch. 20 - What types of costs are customarily included in...Ch. 20 - Which type of manufacturing cost (direct...Ch. 20 - Which of the following costs would be included in...Ch. 20 - In the variable costing income statement, how are...Ch. 20 - Since all costs of operating a business are...Ch. 20 - Discuss how financial data prepared on the basis...Ch. 20 - Why might management analyze product...Ch. 20 - Explain why rewarding sales personnel on the basis...Ch. 20 - Discuss the two factors affecting both sales and...Ch. 20 - How is the quantity factor for an increase or a...
Ch. 20 - Explain why service companies use different...Ch. 20 - Prob. 20.1APECh. 20 - Variable costing Marley Company has the following...Ch. 20 - Variable costingproduction exceeds sales Fixed...Ch. 20 - Variable costingproduction exceeds sales Fixed...Ch. 20 - Variable costingsales exceed production The...Ch. 20 - Variable costing sales exceed production The...Ch. 20 - Analyzing income under absorption and variable...Ch. 20 - Analyzing income under absorption and variable...Ch. 20 - Contribution margin by segment The following...Ch. 20 - Contribution margin by segment The following...Ch. 20 - Contribution margin analysis The actual price for...Ch. 20 - Contribution margin analysis The actual variable...Ch. 20 - Inventory valuation under absorption costing and...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Cost of goods manufactured, using variable costing...Ch. 20 - Variable costing income statement On June 50, the...Ch. 20 - Absorption costing income statement On July 31,...Ch. 20 - Variable costing income statement The following...Ch. 20 - Estimated income statements, using absorption and...Ch. 20 - Variable and absorption costing Ansara Company had...Ch. 20 - Variable and absorption costingthree products...Ch. 20 - Prob. 20.11EXCh. 20 - Product profitability analysis Power Train Sports...Ch. 20 - Territory and product profitability analysis Coast...Ch. 20 - Prob. 20.14EXCh. 20 - Segment profitability analysis The marketing...Ch. 20 - Prob. 20.16EXCh. 20 - Prob. 20.17EXCh. 20 - Prob. 20.18EXCh. 20 - Contribution margin analysis variable costs Based...Ch. 20 - Variable costing income statement for a service...Ch. 20 - Contribution margin reporting and analysis for a...Ch. 20 - Variable costing income statement and contribution...Ch. 20 - Prob. 20.1APRCh. 20 - Income statements under absorption costing and...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Salespersons' report and analysis Walthman...Ch. 20 - Prob. 20.5APRCh. 20 - Contribution margin analysis Dozier Industries...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Salespersons' report and analysis Pachec Inc....Ch. 20 - Prob. 20.5BPRCh. 20 - Contribution margin analysis Mathews Company...Ch. 20 - Prob. 20.1CPCh. 20 - Prob. 20.3CPCh. 20 - Prob. 20.4CPCh. 20 - Prob. 20.5CP
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- Sales Needed to Earn Target Income Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals 78,000 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the sales revenue that Chillmax must make to earn operating income of 81,900 by using the point in sales equation. 2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.arrow_forwardActivity-Based Supplier Costing Levy Inc. manufactures tractors for agricultural usage. Levy purchases the engines needed for its tractors from two sources: Johnson Engines and Watson Company. The Johnson engine has a price of 1,000. The Watson engine is 900 per unit. Levy produces and sells 22,000 tractors. Of the 22,000 engines needed for the tractors, 4,000 are purchased from Johnson Engines, and 18,000 are purchased from Watson Company. The production manager, Jamie Murray, prefers the Johnson engine. However, Jan Booth, purchasing manager, maintains that the price difference is too great to buy more than the 4,000 units currently purchased. Booth also wants to maintain a significant connection with the Johnson source just in case the less expensive source cannot supply the needed quantities. Jamie, however, is convinced that the quality of the Johnson engine is worth the price difference. Frank Wallace, the controller, has decided to use activity costing to resolve the issue. The following activity cost and supplier data have been collected: Required: 1. CONCEPTUAL CONNECTION Calculate the activity-based supplier cost per engine (acquisition cost plus supplier-related activity costs). (Round to the nearest cent.) Which of the two suppliers is the low-cost supplier? Explain why this is a better measure of engine cost than the usual purchase costs assigned to the engines. 2. CONCEPTUAL CONNECTION Consider the supplier cost information obtained in Requirement 1. Suppose further that Johnson can only supply a total of 20,000 units. What actions would you advise Levy to undertake with its suppliers?arrow_forwardQuality Cost Report Whitley Company had total sales of 1,000,000 for the year ending 20X1. The costs of quality are given below. Required: 1. Prepare a quality cost report, classifying costs by category and expressing each category as a percentage of sales. What message does the cost report provide? 2. Prepare a bar graph and pie chart that illustrate each categorys contribution to total quality costs. Comment on the significance of the distribution.arrow_forward
- Salespersons report and analysis Pachec Inc. employs seven salespersons to sell and distribute its product throughout the state. Data taken from reports received from the salespersons during the year ended June 30 are as follows: Instructions 1. Prepare a table indicating contribution margin, variable cost of goods sold as a percent of sales, variable selling expenses as a percent of sales, and contribution margin ratio by salesperson. 2. Which salesperson generated the highest contribution margin ratio for the year and why? 3. Briefly list factors other than contribution margin that should be considered in evaluating the performance of salespersons.arrow_forwardVariable-Costing and Absorption-Costing Income Borques Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows: During the year, Borques produced 200,000 wooden pallets and sold 204,300 at 9 each. Borques had 8,200 pallets in beginning finished goods inventory; costs have not changed from last year to this year. An actual costing system is used for product costing. Required: 1. What is the per-unit inventory cost that is acceptable for reporting on Borquess balance sheet at the end of the year ? How many units are in ending inventory? What is the total cost of ending inventory? 2. Calculate absorption-costing operating income. 3. CONCEPTUAL CONNECTION What would the per-unit inventory cost be under variable costing? Does this differ from the unit cost computed in Requirement 1? Why? 4. Calculate variable-costing operating income. 5. Suppose that Borques Company had sold 196,700 pallets during the year. What would absorption-costing operating income have been? Variable-costing operating income?arrow_forward
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