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HELP The Big Truck Shop Inc is a large retailer of liners for pickup trucks. The liners are purchased from a supplier for $250 each.
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The Big Truck Shop Inc is a large retailer of liners for pickup trucks. The liners are purchased from a supplier for $250 each. Big Truck Shop sells each liner to its customers for $500. An income statement for the most recent quarter is presented below: The Big Truck Shop Income Statement for First Quarter of Current Year $ 700,000 350,000 350,000 Sales Less: Cost of goods sold Gross margin Less: Operating expenses: Selling expenses Administrative expenses Net income $195,000 144,000 339,000 $11,000 The company's variable selling expenses are $25 per liner sold. The remaining selling expenses are fixed. The variable administrative expenses are $75 per liner sold. The remaining administrative expenses are fixed. Required: a. Prepare an income statement for the quarter, using the contribution approach. Include columns for percentage (%) and per unit amounts. b. Calculate break even in both units and total sales dollars. c. Calculate the margin of safety both in dollars and as a percentage of sales. d. Calculate the revised operating income (loss) assuming that the sales volume increases by 10%. Do not prepare a new income statement. Use the incremental approach. e. Calculate the revised operating income (loss) assuming that the sales volume decreases by 25%. Do not prepare a new income statement. Use the incremental approach. f. Management is convinced that purchasing a higher quality product from another vendor for $275 per liner will increase sales by 260 units. The selling price, and total selling and admin expenses will not change. Do you recommend implementing management's suggestion? Why or why not? Support your answer with one appropriate calculation. SUPPORTING CALCULATIONS MUST BE PROVIDED TO EARN AVAILABLE POINTSStep by Step Solution
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