HI, HELP ME WITH STEP BY STEP PLEASE, THANK YOU 
G37 X fx 100% H A B D E F 1 Question 1: Cost Classifications, CVP Income Statement & Analysts (31 marks) 2 3 Note from Kelly, the junior accountant: Hi there! Welcome to the team. I'm Kelly, the junior accountant here at Mountain Sports. I've been working with the company for awhile now, helping out with the bookkeeping. My mom is one of the owners. Anyway, I am quite comfortable with preparing a traditional income statement (this is the income statement learned to prepare in financial accounting). However, the owners are interested in quite a few CVP concepts. I leamed about these in my introductory managerial accounting course but it's been awhile. Could you help me classify each of the operating expenses as variable or fixed expenses (Part A below)? After that, I think it would be helpful to prepare a CVP income statement (Part 3) so that those other concepts (like break-even, margin of safety etc) can be calculated (Part. My mom thought it would be a great idea to present these calculations along with detailed explanations to all of the owners since three of the owners aren't actively involved in the day to day operations of the business. Oh, I should tell you, the owners do not have an accounting background so we have to explain those CVP concepts in a way that they can understand. Thanks so much for your help! 4 PartA: Cost Classification (Chapter 2, 6) (5 marks) 5 6 Mountain Sports Ltd. 7 7 Income Statement 8 For the Year Ended Dec 31, 2019 9 10 Sales 11 Cost of goods sold 12 Gross margin 1,895,344 771,777 1,123,567 Vartable or Fbied Required:Classify each of the below operating expenses as vartable or fixed. Cost Cost of goods sold increases proportionately with sales Employees are paid foved monthly salaries supplemented by a commission on all sales except for the Parts & Service department's sales (see Note 1 below for sales information by department) 13 Operating expenses: (See notes) 14 Advertising 15 16 Depreciation 16 Property taxes 17 Rent 18 Parts & service expenses 19 Salaries and commissions 20 Utilities 21 Total operating expenses 22 Operating income 23 Interest expenses 24 Income before taxes 25 Income taxes 26 Net income 27 94,000 23,745 37,583 128,860 96,749 403,560 103,941 888,439 235,128 10,000 225,128 61,753 163,376 Monthly Salaries To be calculated by the group Commission as a percentage of sales 11% Rent components: Monthly 6,000 Percentage of sales 3% Utilities costs incurred are independent of sales volume they will not change if sales volume changes). Parts and Service expense varies with sales activity and can be traced to each product line. The company uses straight-line depreciation on all depreciable assets. The property taxes are set by the City and do not change with changes in sales volume. Advertising budgets are committed to at the beginning of each year. Note 1: Sales by Department (taken from Q2 segmented income statement) Cross Country Ski Packages Mountain Bikes Sales $ 695,709 $ 719,9145 Accessories Parts & Service 353,106 $ 126,615 28 29 D F G H Part B: CVP Income Statement (Chapter 6) (13 marks) Prepare a contribution margin income statement (below), using the traditional income statement provided and the cost information provided in Part A Check figures have been provided to ensure you are on the right track. Ultimately your group will over-write the c figures with formulas, however, it will be your group's responsibility to ensure that you match up the check figures to the original workbook provided. Mountain Sports Ltd. Contribution Margin Income Statement For the Year Ended Dec 31, 2019 Note from Instructor: All formulas must be completed within the answer boxes. Do not use a calculator and input the final answer. It will result in rounding errors and you will be marked as incorrect. This is applicable for all calculations in the case study. TOTAL PERCENT Note from Instructor: You will be marked as incorrect if you do not follow instructions! Please read carefully! Sales $1,895,344 100% Less: Variable Costs (must be listed in alphabeticabrder): Total variable costs Contribution Margin Less: Fixed Costs (must be listed in alphabeticabrder) Total Flxed Costs Operating Income Less: Interest Expense Earnings Before Income Taxes Less: Income Taxes Net Income Note from Instructor: PartC: CVP Analyst (Chapter 6) (13 marks) You may increase the size of the columns, however, do not change Calculate the following and explain each cakulation (in your own words). Be sure to explain what the number you've calculated means, ensuring you write it in a way so that a non-accountant can understand. For example, if you calculate a breakeven point of $1,000, wi the formatting. Do not merge does $1,000 mean? Marks will not be awarded for textbook definitions. cells in any of the answer boxes. In other questions, you may need to increase the size of the column but again, please do not merge any cells. Calculation Explanation 1) Breakeven Point in Sales Dollars 2) Margin of Safety (In percent) 2a) Note from junior accountant: is higher or lower margin of safety better? Why? NA-no calculations 3) Degree of Operating Leverage (DOL) (operating income to be used in calculation) 4) Estimated percentage decrease in operating income if sales decrease by 20% (use DOL, do not prepare an income statement) 4a) The junior accountant left a note for you: In the managerial accounting course that took I learned that degree of operating leverage is a measure of risk I don't really derstand that. Can you help me understand? What does leverage mean? Is it better to have high leverage or low leverage? The owners have asked me if they should focus more on variable costs or fixed costs, what should I say? N/A-no calculations needed G37 X fx 100% H A B D E F 1 Question 1: Cost Classifications, CVP Income Statement & Analysts (31 marks) 2 3 Note from Kelly, the junior accountant: Hi there! Welcome to the team. I'm Kelly, the junior accountant here at Mountain Sports. I've been working with the company for awhile now, helping out with the bookkeeping. My mom is one of the owners. Anyway, I am quite comfortable with preparing a traditional income statement (this is the income statement learned to prepare in financial accounting). However, the owners are interested in quite a few CVP concepts. I leamed about these in my introductory managerial accounting course but it's been awhile. Could you help me classify each of the operating expenses as variable or fixed expenses (Part A below)? After that, I think it would be helpful to prepare a CVP income statement (Part 3) so that those other concepts (like break-even, margin of safety etc) can be calculated (Part. My mom thought it would be a great idea to present these calculations along with detailed explanations to all of the owners since three of the owners aren't actively involved in the day to day operations of the business. Oh, I should tell you, the owners do not have an accounting background so we have to explain those CVP concepts in a way that they can understand. Thanks so much for your help! 4 PartA: Cost Classification (Chapter 2, 6) (5 marks) 5 6 Mountain Sports Ltd. 7 7 Income Statement 8 For the Year Ended Dec 31, 2019 9 10 Sales 11 Cost of goods sold 12 Gross margin 1,895,344 771,777 1,123,567 Vartable or Fbied Required:Classify each of the below operating expenses as vartable or fixed. Cost Cost of goods sold increases proportionately with sales Employees are paid foved monthly salaries supplemented by a commission on all sales except for the Parts & Service department's sales (see Note 1 below for sales information by department) 13 Operating expenses: (See notes) 14 Advertising 15 16 Depreciation 16 Property taxes 17 Rent 18 Parts & service expenses 19 Salaries and commissions 20 Utilities 21 Total operating expenses 22 Operating income 23 Interest expenses 24 Income before taxes 25 Income taxes 26 Net income 27 94,000 23,745 37,583 128,860 96,749 403,560 103,941 888,439 235,128 10,000 225,128 61,753 163,376 Monthly Salaries To be calculated by the group Commission as a percentage of sales 11% Rent components: Monthly 6,000 Percentage of sales 3% Utilities costs incurred are independent of sales volume they will not change if sales volume changes). Parts and Service expense varies with sales activity and can be traced to each product line. The company uses straight-line depreciation on all depreciable assets. The property taxes are set by the City and do not change with changes in sales volume. Advertising budgets are committed to at the beginning of each year. Note 1: Sales by Department (taken from Q2 segmented income statement) Cross Country Ski Packages Mountain Bikes Sales $ 695,709 $ 719,9145 Accessories Parts & Service 353,106 $ 126,615 28 29 D F G H Part B: CVP Income Statement (Chapter 6) (13 marks) Prepare a contribution margin income statement (below), using the traditional income statement provided and the cost information provided in Part A Check figures have been provided to ensure you are on the right track. Ultimately your group will over-write the c figures with formulas, however, it will be your group's responsibility to ensure that you match up the check figures to the original workbook provided. Mountain Sports Ltd. Contribution Margin Income Statement For the Year Ended Dec 31, 2019 Note from Instructor: All formulas must be completed within the answer boxes. Do not use a calculator and input the final answer. It will result in rounding errors and you will be marked as incorrect. This is applicable for all calculations in the case study. TOTAL PERCENT Note from Instructor: You will be marked as incorrect if you do not follow instructions! Please read carefully! Sales $1,895,344 100% Less: Variable Costs (must be listed in alphabeticabrder): Total variable costs Contribution Margin Less: Fixed Costs (must be listed in alphabeticabrder) Total Flxed Costs Operating Income Less: Interest Expense Earnings Before Income Taxes Less: Income Taxes Net Income Note from Instructor: PartC: CVP Analyst (Chapter 6) (13 marks) You may increase the size of the columns, however, do not change Calculate the following and explain each cakulation (in your own words). Be sure to explain what the number you've calculated means, ensuring you write it in a way so that a non-accountant can understand. For example, if you calculate a breakeven point of $1,000, wi the formatting. Do not merge does $1,000 mean? Marks will not be awarded for textbook definitions. cells in any of the answer boxes. In other questions, you may need to increase the size of the column but again, please do not merge any cells. Calculation Explanation 1) Breakeven Point in Sales Dollars 2) Margin of Safety (In percent) 2a) Note from junior accountant: is higher or lower margin of safety better? Why? NA-no calculations 3) Degree of Operating Leverage (DOL) (operating income to be used in calculation) 4) Estimated percentage decrease in operating income if sales decrease by 20% (use DOL, do not prepare an income statement) 4a) The junior accountant left a note for you: In the managerial accounting course that took I learned that degree of operating leverage is a measure of risk I don't really derstand that. Can you help me understand? What does leverage mean? Is it better to have high leverage or low leverage? The owners have asked me if they should focus more on variable costs or fixed costs, what should I say? N/A-no calculations needed
