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Morton Company's contribution format income statement for last month is given below: The industry in which Morton Company operates is quite sensitive to cyclical movements
Morton Company's contribution format income statement for last month is given below: The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $ per unit. However, fixed expenses would increase to a total of $ each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the fixed expenses. Refer to the income statements in For the present operations and the proposed new operations, compute a the degree of operating leverage, b the breakeven point in dollar sales, and c the margin of safety in dollars and the margin of safety percentage. Refer again to the data in As a manager, what factor would be critical in deciding whether to purchase the new equipment? Assume enough funds are available to make the purchase. Refer to the original data. Rather than purchase new equipment, the marketing manager argues the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons
Morton Company's contribution format income statement for last month is given below:
The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably
from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of
improving profits.
Required:
New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses
would be reduced by $ per unit. However, fixed expenses would increase to a total of $ each month. Prepare two contribution
format income statements, one showing present operations and one showing how operations would appear if the new equipment is
purchased. Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the
fixed expenses.
Refer to the income statements in For the present operations and the proposed new operations, compute a the degree of operating
leverage, b the breakeven point in dollar sales, and c the margin of safety in dollars and the margin of safety percentage.
Refer again to the data in As a manager, what factor would be critical in deciding whether to purchase the new equipment? Assume
enough funds are available to make the purchase.
Refer to the original data. Rather than purchase new equipment, the marketing manager argues the company's marketing strategy should
be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons
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