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The following table contains
financial information from 5 different companies:
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Company
A |
Company
B |
Company
C |
Company
D |
Company
E |
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December 31, 2010
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Assets
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$
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37,000
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$
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28,860
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$
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23,680
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$
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65,860
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$
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101,010
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Liabilities
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30,340
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20,202
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12,787
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45,443
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?
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December 31, 2011
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Assets
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40,000
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28,800
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?
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72,800
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110,400
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Liabilities
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?
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19,584
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13,132
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34,944
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87,216
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During year 2011
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Stock
issuances
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6,000
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1,400
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9,750
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?
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6,500
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Net
income (loss)
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8,840
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?
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1,100
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10,439
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7,482
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Cash
dividends
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3,500
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2,000
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5,875
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0
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11,000
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Required:
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Answer the following questions
about Company A (Omit the "$" sign in
your response):
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1a.
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What is the amount of equity on
December 31, 2010?
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Amount of equity
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$
6,660
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1b.
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What is the amount of equity on
December 31, 2011?
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Amount of equity
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$
18,000
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1c.
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What is the amount of liabilities
on December 31, 2011?
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Amount of
liabilities
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$
22,000
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Explanation:
Company A:
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a.
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Equity on December 31,
2010:
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Assets
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$
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37,000
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Liabilities
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(30,340
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)
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Equity
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$
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6,660
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b.
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Equity on December 31, 2011:
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Equity, December 31, 2010
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$
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6,660
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Plus stock issuances
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6,000
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Plus net income
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8,840
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Less cash dividends
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(3,500
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)
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Equity, December 31, 2011
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$
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18,000
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c.
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Amount of liabilities on
December 31, 2011:
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Assets
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$
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40,000
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Equity
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(18,000
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)
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Liabilities
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$
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22,000
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Answer the following questions
about Company B (Omit the "$" sign in
your response):
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2a.
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What is the amount of equity on
December 31, 2010?
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Amount of equity
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$
8,658
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2b.
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What is the amount of equity on
December 31, 2011?
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Amount of equity
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$
9,216
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2c.
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What is net income for year 2011?
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Net income
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$
1,158
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Explanation
Explanation:
Company B:
a. and b.
a. and b.
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12/31/2010
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12/31/2011
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Equity:
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Assets
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$
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28,860
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$
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28,800
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Liabilities
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(20,202
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)
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(19,584
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)
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Equity
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$
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8,658
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9,216
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c.
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Net income for 2011:
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Equity,
December 31, 2010
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$
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8,658
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Plus stock
issuances
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1,400
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Plus net
income
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?
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Less cash
dividends
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(2,000
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)
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Equity,
December 31, 2011
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$
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9,216
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Therefore, net income must have
been $ 1,158.
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3.
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Calculate the amount of assets for
Company C on December 31, 2011. (Omit the
"$" sign in your response)
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Amount of Assets
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$
29,000
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Explanation:
Company C:
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First, calculate the beginning
balance of equity:
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Dec.
31, 2010
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Assets
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$
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23,680
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Liabilities
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(12,787
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)
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Equity
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$
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10,893
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Next, find the ending balance of
equity as follows:
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Equity, December 31,
2010
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$
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10,893
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Plus stock issuances
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9,750
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Plus net income
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1,100
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Less cash dividends
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(5,875
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)
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Equity, December 31,
2011
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$
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15,868
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Finally, find the ending amount of
assets by adding the ending balance of equity to the ending balance of
liabilities:
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Dec.
31, 2011
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Liabilities
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$
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13,132
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Equity
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15,868
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Assets
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$
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29,000
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4.
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Calculate the amount of stock
issuances for Company D during year 2011. (Omit
the "$" sign in your response):
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Amount of stock issuances
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$
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Explanation:
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Company D:
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First, calculate the beginning and
ending owner’s equity balances:
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12/31/2010
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12/31/2011
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Assets
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$
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65,860
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$
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72,800
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Liabilities
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(45,443
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)
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(34,944
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)
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Equity
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$
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20,417
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37,856
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Then, find the amount of stock
issuances during 2011:
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Equity, December 31,
2010
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$
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20,417
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Plus stock issuances
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?
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Plus net income
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10,439
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Less cash dividends
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0
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Equity, December 31,
2011
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$
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37,856
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Thus, stock issuances must have
been: $ 7,000
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5.
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Calculate the amount of
liabilities for Company E on December 31, 2010. (Omit
the "$" sign in your response):
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Amount of Liabilities
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$
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Explanation:
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Company E:
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First, compute the balance of
equity as of December 31, 2011:
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Assets
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$
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110,400
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Liabilities
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(87,216
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)
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Equity
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$
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23,184
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Next, find the beginning balance
of equity as follows:
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Equity, December 31,
2010
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$
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?
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Plus stock issuances
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6,500
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Plus net income
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7,482
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Less cash dividends
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(11,000
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)
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Equity, December 31,
2011
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$
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23,184
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Thus, the beginning balance of
equity was $20,202.
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Finally, find the beginning amount
of liabilities by subtracting the beginning balance of equity from the
beginning balance of assets:
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Dec.
31, 2010
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Assets
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$
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101,010
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Equity
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(20,202
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)
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Liabilities
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$
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80,808
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Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and fixed expenses were $45,000.
ReplyDeleteRequired:
1. What is the company’s contribution margin (CM) ratio? (Omit the "%" sign in your response.)
Contribution margin ratio %
2. Estimate the change in the company’s net operating income if it were to increase its total sales by $1,500. (Omit the "$" sign in your response.)
Estimated change in net operating income $
Shirts Unlimited operates a chain of shirt stores that carry many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel also receive a small basic salary.
ReplyDeleteThe following worksheet contains cost and revenue data for Store 36. These data are typical of the company's many outlets:
Per Shirt
Selling price $ 40.00
Variable expenses:
Invoice cost $ 18.00
Sales commission 7.00
Total variable expenses $ 25.00
Annual
Fixed expenses:
Rent $ 80,000
Advertising 150,000
Salaries 70,000
Total fixed expenses $ 300,000
The company has asked you, as a member of its planning group, to assist in some basic analysis of
its stores and company policies.
Required:
1.
Calculate the annual break-even point in dollar sales and in unit sales for Store 36. (Omit the "$" sign in your response.)
Break-even point in unit sales shirts
Break-even point in dollar sales $
3.
If 19,000 shirts are sold in a year, what would be Store 36's net operating income or loss? (Input the amount as a positive value. Omit the "$" sign in your response.)
$
4.
The company is considering paying the store manager of Store 36 an incentive commission of $3 per shirt (in addition to the salespersons' commissions). If this change is made, what will be the new break-even point in dollar sales and in unit sales? (Omit the "$" sign in your response.)
New break-even point in unit sales shirts
New break-even point in dollar sales $
5.
Refer to the original data. As an alternative to (4) above, the company is considering paying the store manager a $3 commission on each shirt sold in excess of the break-even point. If this change is made, what will be the store’s net operating income or loss if 23,500 shirts are sold in a year? (Input the amount as a positive value. Omit the "$" sign in your response.)
$
6.
Refer to the original data. The company is considering eliminating sales commissions entirely in its stores and increasing fixed salaries by $107,000 annually. If this change is made, what will be the new break-even point in dollar sales and in unit sales in Store 36? (Omit the "$" sign in your response.)
New break-even point in unit sales shirts
New break-even point in dollar sales $
Memofax, Inc., produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below:
ReplyDeleteSales (13,500 units at $20 per unit) $ 270,000
Variable expenses 189,000
Contribution margin 81,000
Fixed expenses 90,000
Net operating loss $ (9,000)
Required:
1.
Compute the company's CM ratio and its break-even point in both units and dollars. (Omit the "%" and "$" signs in your response.)
CM ratio %
Break-even point in units
Break-even point in dollars $
2.
The sales manager feels that an $8,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $70,000 increase in monthly sales. If the sales manager is right, what will the revised net operating income or loss? (Use the incremental approach in preparing your answer.) (Omit the "$" sign in your response.)
is $
3.
Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $35,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? (Input all amounts as positive values. Omit the "$" sign in your response.)
Contribution Income Statement
$
$
4.
Refer to the original data. The company’s advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.60 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $4,500? (Do not round intermediate calculations.)
Sales units
5.
Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $118,000 per month.
a.
Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round intermediate calculations. Omit the "%" and "$" signs in your response.)
CM ratio %
Break-even point in units
Break-even point in dollars $
b.
Assume that the company expects to sell 20,000 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Omit the "$" and "%" signs in your response.)
Not Automated
Automated
Total Per Unit % Total Per Unit %
$ $ $ $
$ $
$ $