need help on 10 F
"I'll never under and this accounting stuff" Blake Dunn yelled, waving the income statement he had just received from his accountant in the morning mail. "Last month, we sold 2,000 stuffed State University mascots and earned $6,565 in operating income. This month, when we sold 3,000 I thought we'd make $9,848. But this income statement shows an operating income of $11,615! How can I ever make plans if I can't predict my income? I'm going to give Janice one last chance to explain this to me," he declared as he picked up the phone to call Janice Miller, his accountant "Will you try to explain this operating income thing to me one more time?" Blake asked Janice. "After I saw last month's income statement, I thought each mascot we sold generated $3.28 in net income; now this month, each one generates $3.87! There was no change in the price we paid for each mascot, so I don't understand how this happened. If I had known I was going to have $11,615 in operating income, I would have looked more seriously at adding to our product line." Taking a deep breath, Janice replied, "Sure, Blake. I'd be happy to explain how you made so much more operating income than you were expecting (b) Your answer is correct. Yo answer is correct. Using the following income statements, prepare a contribution margin income statement for March. (Round per unit answers to 2 decimal places, eg. 52.75.) Sales revenue Cost of goods sold Gross profit Rent expense Wages expense Shipping expense Utilities expense Advertising expense Insurance expense Operating income February $25,000 10,000 15,000 1,500 3,500 1,150 750 1,000 585 $6,515 March $37,500 15,000 22.500 1,500 5,000 1.650 750 1,400 585 $11,615 Question 10 of 10 0.63/1 Total Per unit Sales $ 37500 $ 12.50 Variable costs Cost of goods sold 15000 5 Shipping 1650 55 Advertising 1200 4 Wages 4500 1.5 Total variable costs 22350 7.45 15150 Contribution margin $ 5.05 Fixed expenses Insurance 585 Rent 0.63/1 IN (d) Your answer is correct. Blake wasn't happy with the projected income statement you showed him for a sales level of 1,500 stuffed mascots. He wants to know how many stuffed mascots he will need to sell to earn $5,555 in operating income. 1800 mascots As a safety net, he also wants to know how many stuffed mascots he will need to sell to break even. (Round answer to decimal places, e.g. 5,275.) 700 mascots e Textbook and Media Attempts: 1 of 3 used Blake is evaluating two options to increase the number of mascots sold next month. First, he believes he can increase sales by advertising in the university newspaper. Blake can purchase a package of 12 ads over the next month for a total of $1,500. He believes the ads will increase the number of stuffed mascots sold from 1,500 to 2,200. A second option would be to reduce the selling price. Blake believes a 15% decrease in the price will result in 2,400 mascots sold. Calculate the operating income for each options? Operating Income Option 1 $ 6,075 Option 2 $ 4,097 Which plan should Blake implement? Option 1 At what level of sales would he be indifferent between the two plans? BOB mascots (f) Just after Blake completed an income projection for 2,200 stuffed mascots, his supplier called to inform him of a 10% increase in cost of goods sold, effective immediately, Blake knows that he cannot pass the entire increase on to his customers, but thinks he can pass on half of the 10% increase while suffering only a 10% decrease in units sold. Calculate the operating income? New projection with price increase New projection without price increase $ Should Blake respond to the increase in cost of goods sold with an increase in price? e Textbook and Media
