Question
Presented below are condensed data from the 2017 and 2018 Johnson Plumbing Corporations income statements (in millions): 2017 2018 Revenues $15,060 $12,260 Operational Expenses 9,660
Presented below are condensed data from the 2017 and 2018 Johnson Plumbing Corporations income statements (in millions):
2017 2018
Revenues $15,060 $12,260
Operational Expenses 9,660 8,120
Operating Income $5,400 $4,140
Required: Analyze Johnson Plumbings cost-volume-profit relationships by applying the high-low method of cost estimation to the above information and complete the following:
a. Estimate the variable cost ratio.
b. Estimate annual fixed costs.
c. Compute the contribution margin ratio.
d. Compute the annual break-even point in dollars.
e. Applying these calculations, predict Johnson Plumbings operating income if 2018 revenues are predicted as $15,000 million.
f. What factors make the above analysis appropriateness for Johnson Plumbing? What circumstances would make it inappropriate for Johnson Plumbing?
Please use Excel spreadsheet with formulas so I can better understand it. Thank you!
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