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Question 1 A new intern thinks that the profit for Deluxe Boxes are higher than those calculated using the lump sum method (as in Tab1).
Question 1 A new intern thinks that the profit for Deluxe Boxes are higher than those calculated using the lump sum method (as in Tab1). The intern suggests calculating the profits using an allocation method for fixed costs based on sales volume( the number of boxes sold) to split the Fixed Costs between the Standard and Deluxe Boxes. Required: (Complete the grey spaces): 1) First calculate the percenatge portion each product has of the total sales voume 1) How much fixed costs are allocated to each product based on the sales volume method suggested by the intern? 2) Also calculate the new operating profit percentage (based on sales) for each product. Standard Boxes Deluxe Boxes Total Volumes (per Month) 9 1.5 10.5 Volumes per year (Millions) 108 18 126 Calculate the portion of Sales Volume (percentage sales volume) Calculate how much fixed costs are allocated to each product.
| Question 1 | ||||
| A new intern thinks that the profit for Deluxe Boxes are higher than those calculated using the lump sum method (as in Tab1). The intern suggests calculating the profits using an allocation method for fixed costs based on sales volume( the number of boxes sold) to split the Fixed Costs between the Standard and Deluxe Boxes. Required: (Complete the grey spaces): 1) First calculate the percenatge portion each product has of the total sales voume 1) How much fixed costs are allocated to each product based on the sales volume method suggested by the intern? 2) Also calculate the new operating profit percentage (based on sales) for each product. | ||||
| Standard Boxes | Deluxe Boxes | Total | ||
| Volumes (per Month) | 9 | 1.5 | 10.5 | |
| Volumes per year (Millions) | 108 | 18 | 126 | |
| Calculate the portion of Sales Volume (percentage sales volume) | ||||
| Calculate how much fixed costs are allocated to each product. |
| New Profit Calculation | Standard Boxes ($Millions) | Deluxe Boxes ($Millions) | Total Boxes($ Millions) |
| Revenue | $ 2,030.40 | $ 513.00 | $ 2,543.40 |
| Subtract Variable Costs | $ 1,080.00 | $ 360.00 | $ 1,440.00 |
| Equals: Contribution Margin | $ 950.40 | $ 153.00 | $ 1,103.40 |
| Subtract Fixed Costs | |||
| Equals: Operating Profit | |||
| Operating Profit % (based on Revenue) |
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
