Requirement 1 Two contribution format statements: current and proposed based on business decision. Requirement 2 For each
Fantastic news! We've Found the answer you've been seeking!
Question:
Requirement 1 Two contribution format statements: current and proposed based on business decision.
Requirement 2 For each option current and proposed business decision) calculate the following:
a. Degree of operating leverage
b. Break-even point in dollars
c. Margin of safety in dollars and percentage terms
Requirement 3 What factor would be the most important for you as a manager in deciding whether to purchase the new equipment?
Requirement 4 Based on the information in the textbook required 4: what would be the break-even point in dollar sales for the company under the new marketing strategy?
Transcribed Image Text:
CHECK FIGURE (2c) Present margin of safety: $160,000 4. Determine to increase sales by 5,000 units. this were PROBLEM 8-9 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety Frieden Company's contribution format income statement for the most recent month is given below: [LO1-CC3; LO2- CC5, 6, 8, 9, 10] $800,000 560,000 Sales (40,000 units) Variable expenses Contribution margin 240,000 192,000 $ 48,000 Fixed expenses Net operating income 43 The industry in which Frieden 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: 1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $6 per unit. However, fixed expenses would increase to a total of $432,000 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the fixed expenses. 2. Refer to the income statements in Requirement (1) above. For both present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollars, and (c) the margin of safety in both dollar and percentage terms. 3. Refer again to the data in Requirement (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that ample funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's strategy should be changed. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespeople be paid fixed salaries marketing CHECK FIGURE (2c) Present margin of safety: $160,000 4. Determine to increase sales by 5,000 units. this were PROBLEM 8-9 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety Frieden Company's contribution format income statement for the most recent month is given below: [LO1-CC3; LO2- CC5, 6, 8, 9, 10] $800,000 560,000 Sales (40,000 units) Variable expenses Contribution margin 240,000 192,000 $ 48,000 Fixed expenses Net operating income 43 The industry in which Frieden 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: 1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $6 per unit. However, fixed expenses would increase to a total of $432,000 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the fixed expenses. 2. Refer to the income statements in Requirement (1) above. For both present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollars, and (c) the margin of safety in both dollar and percentage terms. 3. Refer again to the data in Requirement (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that ample funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's strategy should be changed. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespeople be paid fixed salaries marketing CHECK FIGURE (2c) Present margin of safety: $160,000 4. Determine to increase sales by 5,000 units. this were PROBLEM 8-9 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety Frieden Company's contribution format income statement for the most recent month is given below: [LO1-CC3; LO2- CC5, 6, 8, 9, 10] $800,000 560,000 Sales (40,000 units) Variable expenses Contribution margin 240,000 192,000 $ 48,000 Fixed expenses Net operating income 43 The industry in which Frieden 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: 1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $6 per unit. However, fixed expenses would increase to a total of $432,000 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the fixed expenses. 2. Refer to the income statements in Requirement (1) above. For both present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollars, and (c) the margin of safety in both dollar and percentage terms. 3. Refer again to the data in Requirement (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that ample funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's strategy should be changed. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespeople be paid fixed salaries marketing CHECK FIGURE (2c) Present margin of safety: $160,000 4. Determine to increase sales by 5,000 units. this were PROBLEM 8-9 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety Frieden Company's contribution format income statement for the most recent month is given below: [LO1-CC3; LO2- CC5, 6, 8, 9, 10] $800,000 560,000 Sales (40,000 units) Variable expenses Contribution margin 240,000 192,000 $ 48,000 Fixed expenses Net operating income 43 The industry in which Frieden 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: 1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $6 per unit. However, fixed expenses would increase to a total of $432,000 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the fixed expenses. 2. Refer to the income statements in Requirement (1) above. For both present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollars, and (c) the margin of safety in both dollar and percentage terms. 3. Refer again to the data in Requirement (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that ample funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's strategy should be changed. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespeople be paid fixed salaries marketing
Expert Answer:
Related Book For
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
Posted Date:
Students also viewed these accounting questions
-
Frieden Companys contribution format income statement for the most recent month is given below: Sales (40,000 units) . . . . . . . . . . . $800,000 Variable expenses . . . . . . . . . . . . 560,000...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
COP-26 Inc. is a company that finds alternative uses of waste. The companys statement of financial position on April 30 is as follows: COP- 26 Inc. Statement of Financial Position April 30, 2021...
-
The unadjusted trial balance of Simple Consulting Services as at December 31, 2021 is as follows: Cash Accounts receivable Prepaid insurance Supplies inventory Office equipment Accumulated...
-
Give a counterexample to the conjecture that if there is a path from u to v in a directed graph G, then any depth-first search must result in d[v] f[u].
-
Determine the view factors F 13 and F 23 between the rectangular surfaces shown in Fig. P2167. 3 m A2 m A1 m
-
Jud's Manufacturing Company produces one product, Kebo. Because of wide fluctuations in demand for Kebo, the Assembly Department experiences significant variations in monthly production levels. The...
-
Suppose rRF = 5%, rM = 10%, and rA = 12%. a. Calculate Stock As beta. b. If Stock As beta were 2.0, then what would be As new required rate of return?
-
The function has two relative minima. A relative minimum occurs at the point(s) (0, 0). Part: 1/2 Part 2 of 2 O The function has no relative maximum. O The function has one relative maximum. The...
-
The following cross tabulation shows the average speed of the 25 winners by year of the Daytona 500 automobile race (The 2013 World Almanac). a. Calculate the row percentages. b. W hat is the...
-
This question has multiple versions. Read carefully! Two carts of negligible mass are loaded with a number of fans and additional weights which each have the same mass, M, as shown in the image. If...
-
Ethics and the law are not mutually exclusivethey are intertwined.
-
A tort is a civil wrong that is committed against a person or property for which a court provides a remedy in the form of an action for damages.
-
Government ethics committees include the following: Executive branch: Office of Government Ethics U.S. House of Representatives: Committee on Ethics Senate: Select Committee on Ethics Judicial...
-
Political malpractice is negligent conduct by an elected or appointed political official.
-
Forms of negligence Malfeasance: The execution of an unlawful or improper act. Misfeasance: The improper performance of an act that results in injury to another. Nonfeasance: A failure to act when...
-
consider at least three different courses of actions that Sam could take, and discuss the merits of each possible action, before deciding on what you think the best action is. In arriving at your...
-
Explain why each of the following is either a private good or a public good: traffic lights, in line skates, a city park, a chicken salad sandwich, a tennis racket, national defense, a coastal...
-
The following are common tests of details of balances for the audit of accounts receivable: 1. Obtain a list of aged accounts receivable, foot the list, and trace the total to the general ledger. 2....
-
Multiple Choice Questions The following questions deal with audit evidence for the sales and collection cycle. Choose the best response. a. An auditor is performing substantive tests of transactions...
-
This problem requires the use of ACL software, which is included in the CD attached to the text. Information about installing and using ACL and solving this problem can be found in Appendix. You...
-
Computer Data Services (CDS) performs routine and custom information systems services for many companies in a large metropolitan area. CDS has built a reputation for high-quality customer service and...
-
Dwight Corporation has the following groups of individually insignificant leases at 12/31/15. Prepare journal entries to record impairment for each of the groups at 12/31/15. Total costs Total...
-
Lomax Company typically acquires a large number of individually insignificant properties each year. In computing impairment, Lomax groups these properties by year of acquisition. During 2015, Lomax...
Study smarter with the SolutionInn App