CONNECT ONLINE ACCESS F/MANAGERIAL ACC.
6th Edition
ISBN: 9781264445356
Author: Noreen
Publisher: MCG
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Chapter IE, Problem 9E
1.
To determine
Introduction: The income statement of the business shows all incomes and expenses of the business at the end it shows the net income or loss for the business. This is one of the financial statements of the business, which is used for analyzing the profitability of the business.
To prepare: The new contribution format segmented income statement.
2a.
To determine
Introduction: A product line should be eliminated when it is giving adverse results to the company. It may be due to the obsolescence of the product, loss of appeal, changes in company objectives, or replacement with new products.
To discuss: Whether the elimination of Product line C is correct or not.
2b.
To determine
Introduction: The contribution margin ratio determines the change in contribution margin with respect to the given change in sales.
To discuss: Whether the company should focus all available resources on promoting the Product line T.
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Contribution Margin and Contribution Margin Ratio
For a recent year, McDonald's (MCD) company-owned restaurants had the following sales and expenses (in millions):
Sales
$15,295.0
Food and packaging
$(4,896.9)
Payroll
(4,134.2)
Occupancy (rent, depreciation, etc.)
(3,667.7)
General, selling, and administrative expenses
(2,384.5)
$(15,083.3)
Operating income
$211.7
Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.
a. What is McDonald's contribution margin? Round to the nearest tenth of a million (one decimal place).
million
b. What is McDonald's contribution margin ratio? Round to one decimal place.
%
c. How much would operating income increase if same-store sales increased by $800 million for the coming year, with no change in the contribution margin ratio or fixed
costs? Round your answer to the nearest…
Contribution Margin
Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete the following table from the data provided on the income statements. Each company sold 80,800 units during the year.
Cover-to-CoverCompany
Biblio FilesCompany
Contribution margin ratio (percent)
fill in the blank 5d4936053f95060_1%
fill in the blank 5d4936053f95060_2%
Unit contribution margin
$fill in the blank 5d4936053f95060_3
$fill in the blank 5d4936053f95060_4
Break-even sales (units)
fill in the blank 5d4936053f95060_5
fill in the blank 5d4936053f95060_6
Break-even sales (dollars)
$fill in the blank 5d4936053f95060_7
$fill in the blank 5d4936053f95060_8
Question Content Area
Income Statement - Cover-to-Cover
Cover-to-Cover CompanyContribution Margin Income StatementFor the Year Ended December 31, 20Y8
Sales
$404,000
Variable costs:
Manufacturing expense…
Contribution Margin
Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete the following table from the data provided on the income statements. Each company sold 80,800 units during the year.
Cover-to-CoverCompany
Biblio FilesCompany
Contribution margin ratio (percent)
fill in the blank 88433c080069046_1%
fill in the blank 88433c080069046_2%
Unit contribution margin
$fill in the blank 88433c080069046_3
$fill in the blank 88433c080069046_4
Break-even sales (units)
fill in the blank 88433c080069046_5
fill in the blank 88433c080069046_6
Break-even sales (dollars)
$fill in the blank 88433c080069046_7
$fill in the blank 88433c080069046_8
Question Content Area
Income Statement - Cover-to-Cover
Cover-to-Cover CompanyContribution Margin Income StatementFor the Year Ended December 31, 20Y8
Sales
$404,000
Variable costs:
Manufacturing expense…
Chapter IE Solutions
CONNECT ONLINE ACCESS F/MANAGERIAL ACC.
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