Show an amount column a per unit column

Assignment Help Managerial Accounting
Reference no: EM132540724

Microdisc Company's contribution format income statement for last month is given below:

Sales (12,000 units 3 $30 per unit) . . . . . . . . . $360,000

Variable expenses . . . . . . . . . . . . . . . . . . . . . . 252,000

Contribution margin . . . . . . . . . . . . . . . . . . . . . 108,000

Fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . 90,000

Net operating income . . . . . . . . . . . . . . . . . . $ 18,000

The industry in which Microdisc Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

Required:

Question 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $9 per unit. However, fixed expenses would increase to a total of $225,000 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the fixed expenses.

Question 2. Refer to the income statements in (1) above. For both present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in both dollar and percentage terms.

Question 3. Refer again to the data in (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.)

Question 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses would be $180,000; and its net operating income would increase by 20%. Compute the break-even point in dollar sales for the company under the new marketing strategy. Do you agree with the marketing manager's proposal?

Reference no: EM132540724

Questions Cloud

Describe a time when as a member of a team : Describe a time when, as a member of a team, you worked with others to achieve a particular objective. What challenges did you encounter
Discuss visual assets such as charts-interactive controls : Discuss the visual assets such as charts, interactive controls, and annotations that will occupy space in your work.
What is the current price of the bond : 1. A $1,000 bond has a coupon rate of 4 percent and matures after ten years.
Find the absorption costing net operating income for month : Find the absorption costing net operating income for the month. What is the unit product cost for the month under variable costing?
Show an amount column a per unit column : Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the fixed expenses.
How do the teams manage their team boundaries : How do the teams manage their team boundaries? What are the trade-offs between internal cohesion and external ties within each type of team?
After-tax cash flow from sale of equipment : The firm's tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? (Enter your answer in millions rounded to 1 decimal place.)
Calculate the r-square value and interpret the results : Using both methods above, predict Wedding Bells' Material-Handling costs for a month when 2,300 units of activity are recorded.
Calculate the present value of cindy inheritance : Cindy Arella's godmother just left her an inheritance of $100,000:

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Manage budgets and financial plans

Explain the budgeting process and its importance to a business, identifying the components of different budgets, forecast estimates for inclusion in the budgets.

  Prepare a retained earnings statement

Prepare a retained earnings statement for the year and Prepare a stockholders' equity section of given case.

  Prepare a master budget for the three-month period

Prepare a master budget for the three-month period.

  Construct the companys direct labor budget

Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

  Evaluate the predetermined overhead rate

Evaluate the Predetermined Overhead Rate

  Determine the company''s bid

Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.

  Compute the pool rates for the different activities

Complete the schedule to compute the pool rates for the different activities.

  Prepare Company financial statements

Prepare Company financial statements

  Prepare an analysis of terracycles

This individual assignment is based on the TerraCycle Inc.

  Discuss the ethical issues

Discuss the ethical issues

  Political resources in emerging markets

Calculate the GDP in Income Approach  and Expenditure Approach

  Management accounting - ehsan electronics company

A new plant accountant suggested that the company may be able to assign support costs to products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd