mcm Assignment Summer 2019-2020 Question One |SK3: 5 Marks Sky Company developed the following information for its product: Per Unit Sales price $90 Variable cost 63 Contribution margin S27 Total fixed costs SL.215.000 Required: Answer the following independent questions and show computations using the contribution margin technique to support your answers, a. How many units must be sold to break even? b. What is the total sales that must be generated for the company to earn a profit of S60,000? c. If the company is presently selling 50,000 units, but plans to spend an additional S108,000 on an advertising program, how many additional units must the company sell to cam the same net income it is now making? d. Using the original data in the problem, compute a new break-even point in units if the unit sales price is increased 20%, unit variable cost is increased by 10%, and total fixed costs are increased by S236,250. Page 2 of 6 Question Two LARI: 5 Marks The transactions of Sky Computer Services are recorded in the general journal below. General Journal Account Titles and Explanation Date Debit Credit 2019 Sept. 27,000 27,000 4 Cash Owner's Capital (Invested cash in business) Equipment Cash Notes Payable (Paid cash and issued 2-year, 9%, note for equipment) 34,000 9,000 25,000 8 1.000 1.000 15 900 900 18 2,800 Rent Expense Cash (Paid September rent) Prepaid Insurance Cash (Paid one-year liability insurance) Cash Service Revenue (Received cash for delivery services) Salaries and Wages Expense Cash (Paid salaries for current period) Utilities Expense Accounts Payable (Received a bill for September utilities) 2,800 20 500 500 25 100 100 Page 3 of 6 mcm Assignment Summer 2019-2020 30 1.600 Owner's Drawings Cash 1,600 Page 3 of 6 mcm Assignment Summer 2019-2020 30 Owner's Drawings Cash 1.600 1,600 30 (Withdrew cash for personal use) Accounts Receivable Service Revenue (Billed customer for delivery service) 4,500 4.500 Required: a. Post to the appropriate ledger accounts. b. Prepare the trial balance on September 30, 2019 c. Prepare the financial statements of Sky Computer Services on September 30, 2019. Page 4 of 6 mcm Assignment Summer 2019-2020 Question Three (AR2: 5 Marks The comparative condensed income statements of Sky Corporation are shown below. Sky Corporation Comparative Condensed Income Statements For the Years Ended December 31 2020 2019 Net sales Cost of goods sold Gross profit Operating expenses Net income $620,000 450.000 170,000 $4.000 S116.000 $500,000 400.000 100,000 40.000 S 60.000 Required: a. Prepare a horizontal analysis of the income statement data for Sky Corporation using 2019 as a base. (Show the amounts of increase or decrease.) b. Prepare a vertical analysis of the income statement data for Sky Corporation in columnar form for both years. c. Based on the horizontal and the vertical analysis in a, and b, discuss briefly the improvement or lack thereof in financial position and operating results from 2019 to 2020 of Sky Corporation Page 5 of 6 Page 5 of 6 mcm Assignment Summer 2019-2020 Question Four AR2: 5 Marks The following information was taken from the financial statements of Sky Company: 2020 2019 Gross profit on sales $900,000 $840,000 Income before income taxes 280.000 230,000 Net income 240,000 216,000 Net income as a percentage of net sales 89 9% Required: a. Compute the net sales for each year. b. Compute the cost of goods sold in dollars and as a percentage of net sales for each year c. Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes are not operating expenses). Page 6 of 6
