COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 3, Problem 3.17MCQ
During the current year, XYZ Company increased its variable SG&A expenses while keeping fixed SG&A expenses the same. As a result, XYZ’s:
- a. Contribution margin and gross margin will be lower.
- b. Contribution margin will be higher, while its gross margin will remain the same.
- c. Operating income will be the same under both the financial accounting income statement and contribution income statement.
- d. Inventory amounts booked under the financial accounting income statement will be lower than under the contribution income statement.
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3-17 During the current year, XYZ Company increased its variable SG&A expenses while keeping fixedSG&A expenses the same. As a result, XYZ’s:a. Contribution margin and gross margin will be lower.b. Contribution margin will be higher, while its gross margin will remain the same.c. Operating income will be the same under both the financial accounting income statement and contributionincome statement.d. Inventory amounts booked under the financial accounting income statement will be lower than underthe contribution income statement.
Given the following case, calculate the independent effects of a 1 percent increase in Gross Margin, a 1 percent decrease in the
TaxRate, and a 5 percent increase in Sales.
Sales
Cost of goods sold
Selling, general, and
administrative expense
Depreciation
Research and development
Total costs and expenses
Operating Income
Interest expense
Earnings before Income Taxes
Provision for Income Taxes
Net Income
Base
Case
$
2,110
1,456
317
160
53
1,986
124
39
18
1% Increase in Gross Margin
$
$85 $
Colossal Chemical Corporation
Year Ended December 31, 2021
($000,000 omitted)
$67 $
2131.10 $
1470.46
319.67
160
53.28
2003.40
128
39
89
18.63
70.07
$
$
LA
$
LA
1% Decrease in Tax Rate
2110 $
1456
317
160
53
1986
124
39
85
17
68
$
LA
$
LA
$
VA
5% Increase in Sale!
2215.50
1528.70
332.33
160
55.39
2076.41
139.09
39
100.09
21.02
79.07
For the base case in this section, as a percentage of sales, COGS = 69 percent, SGA = 15 percent, R&D = 2.5 percent. Depreciation,
Interest expense are fixed as stated.…
Compute the following for year 2:
2-a. Percentage markup on sales. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4)
2-b. Income tax rate. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4).)
2-c. Net profit margin ratio. Was it a good or poor indicator of performance? (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).)
2-d. Percentage of total resources invested in property, plant, and equipment. (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).)
2-e. Debt-to-equity ratio. Interpret the result. (Round the final answer to 2 decimal places.)
2-f. Return on assets. Assume that long-term debt increased to $36,810 in month 1 of year 2. (Round intermediate calculations to 3 decimal places and percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).)
2-g. Return on equity. (Round percentage answer to 2 decimal places (i.e.,…
Chapter 3 Solutions
COST ACCOUNTING
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Jacks Jax has total fixed costs of 25,000. If the...Ch. 3 - During the current year, XYZ Company increased its...Ch. 3 - Under the contribution income statement, a...Ch. 3 - A company needs to sell 10,000 units of its only...Ch. 3 - Once a company exceeds its breakeven level,...Ch. 3 - Prob. 3.21ECh. 3 - CVP computations. Garrett Manufacturing sold...Ch. 3 - CVP analysis, changing revenues and costs. Sunset...Ch. 3 - CVP exercises. The Deli-Sub Shop owns and operates...Ch. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - CVP analysis, income taxes. Westover Motors is a...Ch. 3 - CVP analysis, income taxes. The Home Style Eats...Ch. 3 - CVP analysis, sensitivity analysis. Perfect Fit...Ch. 3 - CVP analysis, margin of safety. Suppose Morrison...Ch. 3 - Operating leverage. Cover Rugs is holding a 2-week...Ch. 3 - CVP analysis, international cost structure...Ch. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.33ECh. 3 - Prob. 3.34ECh. 3 - Contribution margin, decision making. Welch Mens...Ch. 3 - Contribution margin, gross margin, and margin of...Ch. 3 - Uncertainty and expected costs. Kindmart is an...Ch. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - CVP, target operating income, service firm....Ch. 3 - CVP analysis, margin of safety. Marketing Docs...Ch. 3 - CVP analysis, income taxes. (CMA, adapted) J.T....Ch. 3 - CVP, sensitivity analysis. The Derby Shoe Company...Ch. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - CVP analysis, shoe stores (continuation of 3-43)....Ch. 3 - Prob. 3.45PCh. 3 - Prob. 3.46PCh. 3 - CVP analysis, income taxes, sensitivity. (CMA,...Ch. 3 - Choosing between compensation plans, operating...Ch. 3 - Prob. 3.49PCh. 3 - Multiproduct CVP and decision making. Crystal...Ch. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.52PCh. 3 - Ethics, CVP analysis. Megaphone Corporation...Ch. 3 - Deciding where to produce. (CMA, adapted) Portal...
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