Table 2 SELECTED HISTORICAL INCOME STATEMENT AND RELATED MEASURES 1984 1985 1986
ID: 2340174 • Letter: T
Question
Table 2 SELECTED HISTORICAL INCOME STATEMENT AND RELATED MEASURES 1984 1985 1986 1987 1988 Net Variable Revenues 2,885,969 3,828,255 4,086,667 3,940,799 4,298,748 Semi-Fixed (S-F) Expenses: Salaries Vacation Advertising &Training Supplies/Tools/Laundry Freight Vehicle Demonstrators 18,268 371,314 81,252 4,663 19,483 707 156,129 305,044 1,172,933 1,665,769 1,892,499 1,870,782 2,161,220 600 210,226 31,473 5,719 22,913 10,465 278,531 13,006 968,789 1,211,464 1,289,758 1,360,489 19,468 281,219 75,468 6,528 23,664 1,513 276,201 26,705 288,347 46,141 5,987 23,718 4,969 301,113 19,059 309,608 65,935 5,731 20,370 4,192 loor-Planning Total S-F Expenses Fixed Expenses: 1,449,208 2,050,172 2,290,867 2,164,362 2,653,620 -516,092 1,897 Total Fixed Expenses Operating Profit/(Loss)** 263,828 112,314 96,699 94,345 New Retail Vehicles Sold 1,798 1,977 1,674 1,450 Notes Revenues less variable costs equal Net Variable Revenues (or Contribution Margin, in aggregate) Net Variable Revenue less Total S-F Expenses less Total Fixed Expenses equals Operating Profit/(Loss)Explanation / Answer
In 1984 operating profit was about 9% of net variable revenues, the revenue increased in 1985 with the increase in number of vehicle sold but the operating profit has been reduced to 3%. In 1986 net variable revenues increased with increase in semi fixed expenses and fixed expenses, although the number of vehicle sold decreased resulting into a operating loss of 97000 approx. In 1987 the revenue was reduced marginally but it resulted in a operating loss of about 2.5%. In 1988, the revenue increased by almost 10% butfixed expenses and fixed expenses also increased more than the increase in revenue resulting into net loss of about 13%.
Some Costs appear to be odd in semi fixed expenses
* in 1986 the salaries increased by almost 30% but the number of vehicles sold was reduced by almost 16%
* the value of demonstrators cost is shown in negative
* in year 1986. The sales have decreased although salaries have increased with the decrease in new retail vehicle sold the sales have reduced but the freight has increased
*In the year 1987, net variable revenues decreased and the salaries increased by almost 6% and the number of vehicles sold was decreased by 15%
* in the year 1988 the variable revenues increased by nearly 8% but the semi fixed expenses will increase by 15% and fixed expenses by 20%, resulting into a net loss of 516 000 approx
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