Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Contribution Income Statement and Operating Leverage Florida Berry Basket harvests early - season strawberries for shipment throughout the eastern United States in March. The strawberry

Contribution Income Statement and Operating Leverage
Florida Berry Basket harvests early-season strawberries for shipment throughout the eastern United States in March. The strawberry farm is maintained by a permanent staff of 10 employees and seasonal workers who pick and pack the strawberries. The strawberries are sold in crates containing 100 individually packaged one-quart containers. Affixed to each one-quart container is the distinctive Florida Berry Basket logo inviting buyers to "Enjoy the berry best strawberries in the world!" The selling price is $90 per crate, variable costs are $70 per crate, and fixed costs are $278,000 per year. In the year 2008, Florida Berry Basket sold 43,000 crates.
(a) Prepare a contribution income statement for the year ended December 31,2008. HINT: Use a negative sign with both "costs" answers.
FLORIDA BERRY BASKET
Income Statement
For the Year Ended December 31,2008
Sales Answer
3,870,000
Variable costs Answer
Contribution margin Answer
860,000
Fixed costs Answer
Net income Answer
582,000
(b) Determine the company's 2008 operating leverage. (Round your answer to two decimal places.)
Answer
1.48
(c) Calculate the percentage change in profits if sales decrease by 10 percent. (Round your answer to one decimal place.)
Answer
% decrease
(d) Management is considering the purchase of several berry-picking machines. This will increase annual fixed costs to $378,000 and reduce variable costs to $67.50 per crate. Calculate the effect of this acquisition on operating leverage and explain any change. (Round your answer to two decimal places.)
Answer

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 Management Accounting And Control

Authors: Don R. Hansen, Maryanne M. Mowen

3rd Edition

0324002327, 978-0324002324

More Books

Students also viewed these Accounting questions

Question

=+a) What assumptions and/or conditions are violated by this model?

Answered: 1 week ago

Question

Explain all drawbacks of the application procedure.

Answered: 1 week ago

Question

Whether the board has jurisdiction to conduct an election.

Answered: 1 week ago