Traditional Income Statement Any Year QTR 1 QTR 2 QTR 3 QTR 4 Total Units produc
ID: 2422528 • Letter: T
Question
Traditional Income Statement Any Year QTR 1 QTR 2 QTR 3 QTR 4
Total Units produced and sold 3,500 4,500 6,000 7,000 =21,000
Sales @$100 per unit 350,000 450,000 600,000 700,000 =2,100,000
Cost of goods sold 140,000 180,000 240,000 280,000 840,000 Gross margin 210,000 270,000 360,000 420,000= 1,260,000
Operating expenses:
Salaries 150,000 150,000 150,000 150,000= 600,000
Commissions 21,000 27,000 36,000 42,000 =126,000
Delivery 21,500 26,500 34,000 39,000= 121,000
Depreciation 12,000 12,000 12,000 12,000= 48,000
Insurance 7,500 7,500 7,500 7,500 =30,000
Taxes 4,000 4,000 4,000 4,000 16,000 Utilities 9,000 11,000 14,000 16,000 =50,000
Office supplies 3,800 4,800 6,300 7,300 =22,200
Other 8,500 10,500 13,500 15,500 =48,000
Total operating expenses 237,300 253,300 277,300 293,300 =1,061,200
Operating income (27,300) 16,700 82,700 126,700 =198,800
Instructions: 1. Using the above information prepare an income statement in the contribution format.
2. Compute the: a. contrubution margin per unit
b. contribution margin ratio
c. breakeven point in units and dollars- show your formulas
d. degree of operating leverage
e. margin of safety as a percent and in dollars
f. dollar sales and units required to increase operating income by 25%.
g. from your answer in item d. what would be the result of a 5% Decrease in Sales; a 5% increase in sales.
Explanation / Answer
I have explained the formulas below the table but all the calculations has been done inside the table:
1) COntribution margin per unit = 21000/3500 = 60 per unit
2) contribution ratio = contribution per unit /sales per unit
contribution per unit = 60 therefore the contribution margin = 60/100 = 60%
3) breakeven = fixed cost /contribution per unit = in terms of no of sale unit
and breakeven as per value = fixed cost /Pv ratio
4) margin of safety = normal sales - breakeven sales
5) degree of operating leverage = contribution / net income
Particulars QTR1 QTR2 QTR3 QTR4 Total Units produced 3500 4500 6000 7000 21000 Sales @100 350000 450000 600000 700000 2100000 Variable cost 140000 180000 240000 280000 840000 Total contribution(sales - variable cost) 210000 270000 360000 420000 1260000 Contribution per unit 60 60 60 60 60 contribution margin 60.00% 60.00% 60.00% 60.00% 60.00% PV ratio = contribution/sales 60.00% 60.00% 60.00% 60.00% 60.00% Fixed cost : salaries 150000 150000 150000 150000 600000 Commission 21000 27000 36000 42000 126000 delivery 21500 26500 34000 39000 121000 Depreciation 12000 12000 12000 12000 48000 Insurance 7500 7500 7500 7500 30000 Taxes 4000 4000 4000 4000 16000 Utilities 9000 11000 14000 16000 50000 office supplies 3800 4800 6300 7300 22200 Others 8500 10500 13500 15500 48000 Total Fixed cost 237300 253300 277300 293300 1061200 Break even in terms of no of units 3955 4221.667 4621.667 4888.333 17686.67 Break even in terms of value 395500 422166.7 462166.7 488833.3 1768667 Margin of safety (sales =.- breakeven) -45500 27833.33 137833.3 211166.7 331333.3 Margin of safety percent -13.00% 6.19% 22.97% 30.17% 15.78% Degree of operating leverage= Contribution/Net income -7.69 16.17 4.35 3.31 6.34 Net income -27300 16700 82700 126700 198800Related Questions
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