ProblemsL. Farrah Industries Inc. manufactures only one product. For the year ended December 31, thecontribution margin increased by $560,000 from the planned level of $5,200,000. The president of L.Farrah Industries Inc. has expressed concern about such a small increase in contribution margin and hasrequested a follow-up report.The following data have been gathered from the accounting records for the year ended December 31:Financial CategoriesActualPlannedDifferenceSales30,000,000$28,600,000$ 1,400,000.00Variable costs:Variable cost of goods sold21,600,000$21,450,000$150,000Variable selling and admin expenses2,640,0001,950,000690,000Total variable costs24,240,00023,400,000840,000Contribution Margin5,760,0005,200,000560,000Number of units sold120,000130,000Per unitSales price2$250220Variable cost of goods soldVariable selling and admin expenses2$2$$2$1801652215a. Prepare a contribution margin analysis report for the year ended December 31.b. At a meeting of the board of directors on January 30, the president, after reviewing thecontribution margin analysis report, made the following comment:"It looks as if the price increase of $30 had the effect of increasing sales. However, this was atrade-off since sales volume decreased. Also, variable cost of goods sold per unit increased by$15 more than planned. The variable selling and administrative expenses appear out of control.They increased by $7 per unit more than was planned, which is an increase of over 47% morethan was planned. Let's look into these expenses and get them under control. Also, let'sconsider increasing the sales price to $275 and continue this favorable trade-off between higherprice and lower volume."C.Do you agree with the president's comment? Explain.

L. Farrah Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $560,000 from the planned level of $5,200,000. The president of L. Farrah Industries Inc. has expressed concern about such a small increase in contribution margin and has requested a follow-up report. The following data have been gathered from the accounting records for the year ended December 31:

L. Farrah Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $560,000 from the planned level of $5,200,000. The president of L. Farrah Industries Inc. has expressed concern about such a small increase in contribution margin and has requested a follow-up report. The following data have been gathered from the accounting records for the year ended December 31:

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 34P: Mason, Durant, and Westbrook (MDW) is a tax services firm. The firm is located in Oklahoma City and...

See similar textbooks

Similar questions

Mason, Durant, and Westbrook (MDW) is a tax services firm. The firm is located in Oklahoma City and employs 15 professionals and eight staff. The firm does tax work for small businesses and well-to-do individuals. The following data are provided for the last fiscal year. (The Mason, Durant, and Westbrook fiscal year runs from July 1 through June 30.) Required: 1. Prepare a statement of cost of services sold. 2. Refer to the statement prepared in Requirement 1. What is the dominant cost? Will this always be true of service organizations? If not, provide an example of an exception. 3. Assuming that the average fee for processing a return is 850, prepare an income statement for Mason, Durant, and Westbrook. 4. Discuss three differences between services and tangible products. Calculate the average cost of preparing a tax return for last year. How do the differences between services and tangible products affect the ability of MDW to use the last years average cost of preparing a tax return in budgeting the cost of tax return services to be offered next year?
ABC began operations at the beginning of the current year and keeps absorption-cost accounting records. There is no beginning finished-goods inventory. ABC achieved its planned production level for the year. The company's fixed manufacturing overhead totaled RM188,000, and the firm paid a 10% commission based on gross sales (RM) to its sales force. On the company's profit or loss statement and end-of-year statement of financial position, the following information was included: Profit or Loss Data: RM Sales revenues (35,000 units @ RM24) 840,000 Gross Margin 210,000 Total sales and administrative expenses 160,000 Financial Position Data: Ending finished-goods inventory (12,000 units) 216,0000 Compute ABC's cost of goods sold using absorption costing.
AJ Manufacturing Company Incurred $55,500 of fixed product cost and $44,400 of variable product cost during its first year of operation. Also during its first year, AJ incurred $17.650 of fixed and $14.100 of variable selling and administrative costs. The company sold all of the units it produced for $182.000. Required a. Prepare an income statement using the format required by generally accepted accounting Principles (GAAP) b. Prepare an income statement using the contribution margin approach. Complete this question by entering your answers in the tabs below. Required A Required B Prepare an income statement using the format required by generally accepted accounting Principles (GAAP). AJ MANUFACTURING COMPANY Income Statement
ABC began operations at the beginning of the current year and keeps absorption-cost accounting records. There is no beginning finished-goods inventory. ABC achieved its planned production level for the year. The company's fixed manufacturing overhead totaled RM188,000, and the firm paid a 10% commission based on gross sales (RM) to its sales force. On the company's profit or loss statement and end-of-year statement of financial position, the following information was included: Profit or Loss Data: RM Sales revenues (35,000 units @ RM24) 840,000 Gross Margin 210,000 Total sales and administrative expenses 160,000 Financial Position Data: Ending finished-goods inventory (12,000 units) 216,0000 Compute the fixed manufacturing overhead per unit for ABC.
ABC began operations at the beginning of the current year and keeps absorption-cost accounting records. There is no beginning finished-goods inventory. ABC achieved its planned production level for the year. The company's fixed manufacturing overhead totaled RM188,000, and the firm paid a 10% commission based on gross sales (RM) to its sales force. On the company's profit or loss statement and end-of-year statement of financial position, the following information was included: Profit or Loss Data: RM Sales revenues (35,000 units @ RM24) 840,000 Gross Margin 210,000 Total sales and administrative expenses 160,000 Financial Position Data: Ending finished-goods inventory (12,000 units) 216,0000 Compute the variable cost per unit for ABC using absorption costing.
ABC began operations at the beginning of the current year and keeps absorption-cost accounting records. There is no beginning finished-goods inventory. ABC achieved its planned production level for the year. The company's fixed manufacturing overhead totaled RM188,000, and the firm paid a 10% commission based on gross sales (RM) to its sales force. On the company's profit or loss statement and end-of-year statement of financial position, the following information was included: Profit or Loss Data: RM Sales revenues (35,000 units @ RM24) 840,000 Gross Margin 210,000 Total sales and administrative expenses 160,000 Financial Position Data: Ending finished-goods inventory (12,000 units) 216,0000 Compute the number of units that ABC planned to produce during the year.
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,040 Labor expense 41,580 Sales 188,000 Research and development (uncontrollable) 320 Depreciation expense 17,000 Net income/(loss) ? Cost of goods sold 118,440 Selling expense 1,260 Total expenses Marketing costs (uncontrollable) 790 Administrative expense 690 Income tax expense (21% of pretax income) ? Other expenses 330 A. Prepare the income statement using the above information. Round your answers to the nearest dollar. BDS Enterprises Income Statement For the Year Ended Dec. 31, 20xx Total Expenses B. Calculate the profit margin, return on investment, and residual income. Assume an…
During the first year of operations, Ken's Data Ventures, a Dedham-based construction company, had sales of $4,350,0003; it wrote $35,700 of accounts as uncollectible using direct write-off method, and reported net income of $521,000. Required: If the company were to use the allowance method with uncollectible estimate of 19% of sales, determine what the net income would have been under the allowance method. Show Your Work:
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,040 Labor expense 41,580 Sales 188,000 Research and development (uncontrollable) 315 Depreciation expense 16,000 Net income/(loss) ? Cost of goods sold 118,440 Selling expense 1,260 Total expenses ? Marketing costs (uncontrollable) 780 Administrative expense 700 Income tax expense (21% of pretax income) ? Other expenses 310 B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $100,000 and 6% cost of capital. Round your percentage answers to one decimal place. Profit margin ? % Return on investment ? %…
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,040 Labor expense 41,580 Sales 189,000 Research and development (uncontrollable) 310 Depreciation expense 16,000 Net income/(loss) ? Cost of goods sold 119,070 Selling expense 1,250 Total expenses ? Marketing costs (uncontrollable) 790 Administrative expense 700 Income tax expense (21% of pretax income) ? Other expenses 330 A. Prepare the income statement using the above information. Round your answers to the nearest dollar. BDS Enterprises Income Statement For the Year Ended Dec. 31, 20xx Sales $fill in the blank cde9000a3faf056_2 Cost of…
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,030 Labor expense 41,590 Sales 189,000 Research and development (uncontrollable) 320 Depreciation expense 18,000 Net income/(loss) ? Cost of goods sold 119,070 Selling expense 1,250 Total expenses ? Marketing costs (uncontrollable) 780 Administrative expense 700 Income tax expense (21% of pretax income) ? Other expenses 310 A. Prepare the income statement to include all costs, but separate out uncontrollable costs using the above information. Round your answers to the nearest dollar. BDS Enterprises Income Statement For the Year Ended December…
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,040 Labor expense 41,580 Sales 190,000 Research and development (uncontrollable) 310 Depreciation expense 18,000 Net income/(loss) ? Cost of goods sold 119,700 Selling expense 1,260 Total expenses ? Marketing costs (uncontrollable) 780 Administrative expense 680 Income tax expense (21% of pretax income) ? Other expenses 320 A. Prepare the income statement using the above information. Round your answers to the nearest dollar. B.Calculate the profit margin, return on investment, and residual income. Assume an investment base of $100,000 and 6% cost of capital.…