Income Statement For the Year Ended Dec 31, 2019 Sales 1,952,824 Cost of goods sold 783,091 Gross margin 1,169,733 Operating expenses: (See notes) Advertising Depreciation Property taxes Rent Parts & service expenses Salaries and commissions Utilities Total operating expenses 22 Operating income Interest expenses Income before taxes 99,000 20.981 38,013 75,056 91,432 478, 125 100.044 902,652 267,081 10.000 257,081 64,270 192.811 Income taxes Net income Part A: Cost Classification (Chapter 2, 6) (S marks) Required: Classify each of the below operating expenses as variable or fixed. Variable or Fixed Cost Cost of goods sold increases proportionately with sales Employees are paid fixed monthly salaries supplemented by a commission on all sales except for the Parts & Service department's sales (see note 1 below for sales for each segment). Monthly Salaries To be calculated by the group Commission as a percentage of sales 14% Rent components: Monthly 3,000 Percentage of sales 2% Utilities costs incurred are independent of sales volume (they will not change if sales volume 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 Segment (taken from Q2 segmented income statement) Cross Country Ski Packages Mountain Bikes |Accessories Parts & Service Sales 677,462 $ 784,341 | $ 374,806 $ 116,215 $ Merge General 2 Conditio 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. See the word document provided to your group! Mountain Sports Ltd Contribution Margin income Statement For the Year Ended Dec 31, 2019 Hotes from instructor: Al formatas mit be completed within the answer boxes. Do not use a calciator and put the final answer. wilt result in tourding errors and you will be marked as incorrect. This is applicable for a calculations in the case study, TOTAL PERCENT Sales $1.952,824 100% Less: Variable costs must be listed in alphabetical order: Nole from instructor: You will be marked a incorrect if you do not follow instructions: Please read carefully Total variable costs Less: Fixed Costs must be listed in alphabetical order) Advertising TOTAL 3 04 05 06 + istics Part C: CVP Analysis (Chapter 6) (9 marks) Calculate the following and explain each calculation (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, what does $1,000 mean? Marks will not be Calculation Explanation 1) Breakeven Point in Sales Dollars 2) Margin of Safety (in percent) 3) Degree of Operating Leverage (DOL) (operating income to be used in calculation) 4) The junior accountant left a note for you: In the managerial accounting course that I took I leamed that degree of operating leverage is a measure of risk. I don't really understand that. Can you help me? 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?? They expect that sales will increase next year N/A - no calculations needed Income Statement For the Year Ended Dec 31, 2019 Sales 1,952,824 Cost of goods sold 783,091 Gross margin 1,169,733 Operating expenses: (See notes) Advertising Depreciation Property taxes Rent Parts & service expenses Salaries and commissions Utilities Total operating expenses 22 Operating income Interest expenses Income before taxes 99,000 20.981 38,013 75,056 91,432 478, 125 100.044 902,652 267,081 10.000 257,081 64,270 192.811 Income taxes Net income Part A: Cost Classification (Chapter 2, 6) (S marks) Required: Classify each of the below operating expenses as variable or fixed. Variable or Fixed Cost Cost of goods sold increases proportionately with sales Employees are paid fixed monthly salaries supplemented by a commission on all sales except for the Parts & Service department's sales (see note 1 below for sales for each segment). Monthly Salaries To be calculated by the group Commission as a percentage of sales 14% Rent components: Monthly 3,000 Percentage of sales 2% Utilities costs incurred are independent of sales volume (they will not change if sales volume 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 Segment (taken from Q2 segmented income statement) Cross Country Ski Packages Mountain Bikes |Accessories Parts & Service Sales 677,462 $ 784,341 | $ 374,806 $ 116,215 $ Merge General 2 Conditio 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. See the word document provided to your group! Mountain Sports Ltd Contribution Margin income Statement For the Year Ended Dec 31, 2019 Hotes from instructor: Al formatas mit be completed within the answer boxes. Do not use a calciator and put the final answer. wilt result in tourding errors and you will be marked as incorrect. This is applicable for a calculations in the case study, TOTAL PERCENT Sales $1.952,824 100% Less: Variable costs must be listed in alphabetical order: Nole from instructor: You will be marked a incorrect if you do not follow instructions: Please read carefully Total variable costs Less: Fixed Costs must be listed in alphabetical order) Advertising TOTAL 3 04 05 06 + istics Part C: CVP Analysis (Chapter 6) (9 marks) Calculate the following and explain each calculation (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, what does $1,000 mean? Marks will not be Calculation Explanation 1) Breakeven Point in Sales Dollars 2) Margin of Safety (in percent) 3) Degree of Operating Leverage (DOL) (operating income to be used in calculation) 4) The junior accountant left a note for you: In the managerial accounting course that I took I leamed that degree of operating leverage is a measure of risk. I don't really understand that. Can you help me? 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?? They expect that sales will increase next year N/A - no calculations needed