PERI AND PAUL COMPANY Income Statement For the Year Ended December 31, 2017 (a)

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PERI AND PAUL COMPANY
Income Statement
For the Year Ended December 31, 2017

(a)

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(b)

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(c)

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(d)

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PERI AND PAUL COMPANY
Income Statement
For the Year Ended December 31, 2017

Sales (240,000 units) $1,200,000 Cost of goods sold 800,000 Gross profit 400,000 Operating expenses Selling $280,000 Administrative 150,000 430,000 Net loss $(30,000 )
A cost behavior analysis indicates that 60% of the cost of goods sold are variable, 38% of the selling expenses are variable, and 39% of the administrative expenses are variable.

(Round to nearest unit, dollar, and percentage, where necessary. Use the CVP income statement format in computing profits.)

Explanation / Answer

CVP Income statement Sales $ 1,200,000 Variable costs: Cost of goods sold $            480,000 Selling $            106,400 Administrative $              58,500 $     644,900 Contribution $     555,100 Fixed Costs: Cost of goods sold $            320,000 Selling $            173,600 Administrative $              91,500 $     585,100 Profit $     (30,000) a) Break-even point in dollars $ $        1,260,991 Break-even point in units                252,198 Units b) Profit $            110,900 Break-even point in dollars $ $        1,329,773 Sales(240000*5.25*125%) $ 1,575,000 Variable costs: Cost of goods sold (2.25*240000*125%) $            675,000 Selling $            132,000 Administrative $              72,000 $     879,000 Contribution $     696,000 Fixed Costs: Cost of goods sold $            320,000 Selling $            173,600 Administrative $              91,500 $     585,100 Profit $     110,900 c) Profit $            132,244 Break-even point in dollars $ $        1,524,634 Sales (240000*4.75*161%) $ 1,835,400 Variable costs: Cost of goods sold(2*240000*161%) $            772,800 Selling (0.55*240000*161%) $            212,520 Administrative (150000*39%*161%) $              92,736 $ 1,078,056 Contribution $     757,344 Fixed Costs: Cost of goods sold $            320,000 Selling (280000*62%+40000) $            213,600 Administrative $              91,500 $     625,100 Profit $     132,244 d) Paul plan should be accepted (higher profit) Please write back for issues.

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