Financial & Managerial Accounting
13th Edition
ISBN: 9781285866307
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 20, Problem 20.21EX
Contribution margin reporting and analysis for a service company
The management of East Coast Railroad Company introduced in Exercise 20 improved the profitability of the Atlanta/Baltimore route in May by reducing the price of a railcar from $600 to $500. This price reduction increased the demand for rail services. Thus, the number of railcars increased by 275 railcars to a total of 700 railcars. This was accomplished by increasing the size of each train but not the number of trains. Thus, the number of train-miles was unchanged. All the activity rates remained unchanged.
- A. Prepare a contribution margin report for the Atlanta/Baltimore route for May. Calculate the contribution margin ratio in percentage terms to one decimal place.
- B. Prepare a contribution margin analysis to evaluate management’s actions in May. Assume that the May planned quantity, price, and unit cost were the same as April.
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The South Division of Bramble Company reported the following data for the current year.
Sales
Variable costs
Controllable fixed costs
Average operating assets
1.
2.
Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to
submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of
action.
3.
Return on Investment
$2,900,000
Increase sales by $300,000 with no change in the contribution margin percentage.
Reduce variable costs by $160,000.
Reduce average operating assets by 3.00%.
1,943,000
(a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%)
Action 1
600,000
5,000,000
Action 2
Action 3
(b) Using the ROI equation, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%)
Return on investment
%
%
1 %
%
The South Division of Wiig Company reported the following data for the current year.
Sales
Variable costs
Controllable fixed costs
Average operating assets
1.
2.
3.
Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to
submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of
action.
Return on Investment
$2,950,000
1,947,000
Increase sales by $300,000 with no change in the contribution margin percentage.
Reduce variable costs by $155,000.
Reduce average operating assets by 4%.
Action 1
595,000
(a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.)
Action 2
5,000,000
Action 3
(b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g.
1.57%.)
Return on investment
do
%
%
%
%
Chapter 20 Solutions
Financial & Managerial Accounting
Ch. 20 - What types of costs are customarily included in...Ch. 20 - Which type of manufacturing cost (direct...Ch. 20 - Which of the following costs would be included in...Ch. 20 - In the variable costing income statement, how are...Ch. 20 - Since all costs of operating a business are...Ch. 20 - Discuss how financial data prepared on the basis...Ch. 20 - Why might management analyze product...Ch. 20 - Explain why rewarding sales personnel on the basis...Ch. 20 - Discuss the two factors affecting both sales and...Ch. 20 - How is the quantity factor for an increase or a...
Ch. 20 - Explain why service companies use different...Ch. 20 - Prob. 20.1APECh. 20 - Variable costing Marley Company has the following...Ch. 20 - Variable costingproduction exceeds sales Fixed...Ch. 20 - Variable costingproduction exceeds sales Fixed...Ch. 20 - Variable costingsales exceed production The...Ch. 20 - Variable costing sales exceed production The...Ch. 20 - Analyzing income under absorption and variable...Ch. 20 - Analyzing income under absorption and variable...Ch. 20 - Contribution margin by segment The following...Ch. 20 - Contribution margin by segment The following...Ch. 20 - Contribution margin analysis The actual price for...Ch. 20 - Contribution margin analysis The actual variable...Ch. 20 - Inventory valuation under absorption costing and...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Cost of goods manufactured, using variable costing...Ch. 20 - Variable costing income statement On June 50, the...Ch. 20 - Absorption costing income statement On July 31,...Ch. 20 - Variable costing income statement The following...Ch. 20 - Estimated income statements, using absorption and...Ch. 20 - Variable and absorption costing Ansara Company had...Ch. 20 - Variable and absorption costingthree products...Ch. 20 - Prob. 20.11EXCh. 20 - Product profitability analysis Power Train Sports...Ch. 20 - Territory and product profitability analysis Coast...Ch. 20 - Prob. 20.14EXCh. 20 - Segment profitability analysis The marketing...Ch. 20 - Prob. 20.16EXCh. 20 - Prob. 20.17EXCh. 20 - Prob. 20.18EXCh. 20 - Contribution margin analysis variable costs Based...Ch. 20 - Variable costing income statement for a service...Ch. 20 - Contribution margin reporting and analysis for a...Ch. 20 - Variable costing income statement and contribution...Ch. 20 - Prob. 20.1APRCh. 20 - Income statements under absorption costing and...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Salespersons' report and analysis Walthman...Ch. 20 - Prob. 20.5APRCh. 20 - Contribution margin analysis Dozier Industries...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Salespersons' report and analysis Pachec Inc....Ch. 20 - Prob. 20.5BPRCh. 20 - Contribution margin analysis Mathews Company...Ch. 20 - Prob. 20.1CPCh. 20 - Prob. 20.3CPCh. 20 - Prob. 20.4CPCh. 20 - Prob. 20.5CP
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