Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

can you please answer 1,2,3,4? Please make sure to illustrate the table for 1 AND 2 in your answer, the last picture shows how your

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

can you please answer 1,2,3,4? Please make sure to illustrate the table for 1 AND 2 in your answer, the last picture shows how your ANSWER SHOULD LOOK LIKE.

\begin{tabular}{|l|l|l|l|l|} \hline \multicolumn{2}{|c|}{ Present } & \multicolumn{2}{c|}{ Proposed } \\ \hline a. Degree of operating leverage & & & \\ \hline b. Break-even point in dollar sales & & & & \\ \hline c. Margin of safety in dollars & & & & \\ \hline c. Margin of safety in percentage & & % & & % \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|} \hline \multicolumn{6}{|c|}{ Morton Company } \\ \hline \multicolumn{6}{|c|}{ Contribution Income Statement } \\ \hline \multicolumn{3}{|c|}{ Present } & \multicolumn{3}{|c|}{ Proposed } \\ \hline Amount & Per Unit & % & Amount & Per Unit & % \\ \hline & & & & & \\ \hline & & & & & \\ \hline 0 & 0.00 & 0 & 0 & 0.00 & 0 \\ \hline 0 & & & 0 & & \\ \hline \end{tabular} Morton Company's contribution format income statement for last month is given below: The industry in which Morton 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 onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $6.30 per unit. However, fixed expenses would increase to a total of $567,000 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. 2. Refer to the income statements in (1). For the 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 dollars and the margin of safety percentage. 3. Refer again to the data in (1). As a manager, what factor would be critical in deciding whether to purchase the new equipment? (Assume enough funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues 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 $402,150; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy. Revised variable cost per unit =$17.50$7.50=$10.00

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting For Managerial Planning Decision Making And Control

Authors: Andrew Schiff, Hsihui Chang, Woody M Liao, James L Boockholdt

5th Edition

0759340412, 978-0759340411

More Books

Students also viewed these Accounting questions