Question
Techtronics Software, Inc. specializes in customized spreadsheet software. The results of the companys operations during the prior year (20xx) are given in the following table.
Techtronics Software, Inc. specializes in customized spreadsheet software. The results of the companys operations during the prior year (20xx) are given in the following table. All units produced during the year were sold. (Ignore income taxes.)
| Sales revenue | $ 3,000,000 | |
| Manufacturing costs: | ||
| Fixed | 500,000 | |
| Variable | 1,000,000 | |
| Selling costs: | ||
| Fixed | 50,000 | |
| Variable | 100,000 | |
| Administrative costs: | ||
| Fixed | 120,000 | |
| Variable | 30,000 |
Required:
- Prepare a traditional income statement and a contribution income statement for the company.
- What is the firms operating leverage for the sales volume generated during the prior year?
- Suppose sales revenue increases by 20 percent. What will be the percentage increase in net income?
- Which income statement would an operating manager use to answer requirement (3)? Why?
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Fundamentals Of International Financial Accounting And Reporting
Authors: Roger Hussey
1st Edition
9814280232, 9789814280235
