9:05 AM instructure-uploads.s3.amazonaws.com Verizon 100%- 7. What is contributi
ID: 2566446 • Letter: 9
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9:05 AM instructure-uploads.s3.amazonaws.com Verizon 100%- 7. What is contribution margin if 75,000 units are sold? A. $1,725,000 B. S1,850,000 C. $1,930,000 D, $1,963,000 8. What is net income under variable costing if 75,000 units are sold? A. $873,000 B. $905,000 C. $925,000 D, $935,000 Preparation and analysis of budgeted income statements- Questions 9-14 Lilliput, a one-product mail-order firm, buys its product for S60 per unit and sells it for $130 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows: LILLIPUT COMPANY Income Statement For Month Ended December 31, 2011 S1,300,000 Sales Cost of goods sold Gross profit Expenses 700,000 Sales commissions ( 10%) 130,000 Advertising Store Rent 200,000 24,000 Administrative salaries 40,000 50,000 2.000 Other expenses Total expenses Net income 244.000 Management expects December's results to be repeated in January February, and March of 2012 without any changes in strategy Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 20% each month for the next three months (beginning with January) if the item's selling price is reduced to SI 15 per unit and advertising expenses are increased by 25% and remain at that level for all three months. The cost of its product will remain at S60 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same. Required Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. Use a three-column format, with one column for each month. LILLIPUT COMPANYExplanation / Answer
Lillyput Co. Budgeted Income statement Particulars Months January February March Sales (Units) 12000 14400 17280 Selling price p.u 115 115 115 Sales 1380000 1656000 1987200 COGS 720000 864000 1036800 Gross Profit 660000 792000 950400 Expenses Sales Commission (10%) 138000 165600 198720 Advertising 250000 250000 250000 Store rent 24000 24000 24000 Administrative salaries 40000 40000 40000 Depreciation 50000 50000 50000 Other expenses 12000 12000 12000 Total Expenses 514000 541600 574720 Net Income 146000 250400 375680 9.A $660,000 10.C. $146,000 11.C. $792,000 12.B. $250,400 13.D.$950,400 14.A.$375,680 Please hit the like button if the answer helped you else leave a comment for further clarification. Thank you! All the best!
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