Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Stratford Company distributes a lightweight lawn chair that sells for $15 per unit. Variable expenses are $6 per unit, and fixed expenses total $180,000 annually.

Required:


1. What is the product's CM ratio?

2. Use the CM ratio to determine the break-even point in sales dollars.

3.The company estimates that sales will increase by $45,000 during the coming year due to increased demand. By how much should net operating income increase?

4. Assume that the operating results for last year were as follows:


Sales $ 360,000
Variable expenses
144,000

Contribution margin 216,000
Fixed expenses 180,000

Net operating income $
36,000


a. Compute the degree of operating leverage at the current level of sales.

 

b.The president expects sales to increase by 15% next year. By how much should net operating income increase?

 

5.Refer to the original data. Assume that the company sold 28,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $70,000 increase in advertising expenditures, would increase annual unit sales by 50%.

a.Prepare two contribution format income statements, one showing the results of last year's operations and one showing what the results of operations would be if these changes were made. (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places. Input all amounts as positive values except losses which should be indicated by minus sign.)


Last Year
28,000 units
Proposed
units

 


b. Would you recommend that the company do as the sales manager suggests?


Yes
No

6. Refer to the original data. Assume again that the company sold 28,000 units last year. The president feels that it would be unwise to change the selling price. Instead, he wants to increase the sales commission by $2 per unit. He thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach.

 

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M940928

Have any Question? 


Related Questions in Accounting Basics

Question 1medeco bought goods for 250 on credit medeco

Question 1 Medeco bought goods for $250 on credit. Medeco returned $50 worth of goods. Terms of the sale were 2/10, n/30. If Medeco pays the amount owed within the discount period, what is the amount it should pay? A. $2 ...

Question 1bringing account balances up to date before

Question 1 Bringing account balances up to date before preparing financial reports is called A. posting. B. adjusting. C. journalizing. D. analyzing. Question 2 The entry to record the expiration of part of the prepaid r ...

1-15 multiple choice each multiple choice has only one

1-15. Multiple Choice Each multiple choice has only one correct answer. 1. Which of the following aspects of a company could be considered a critical success factor, given the appropriate business environment? A) cutting ...

Assignment the apportionmentyou are a census officer in a

Assignment: The Apportionment You are a census officer in a newly democratic nation and you have been charged with using the census data from the table below to determine how 100 congressional seats should be divided amo ...

Writing assignment cash and receivablesassignment

Writing Assignment: Cash and Receivables Assignment Goals: - Obtain research experience in the Accounting Standards Codification - Obtain experience using SEC filings and the SEC website - Practice writing concise accoun ...

Problem -firm has consulted with investment bankers and

Problem - Firm has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown below. Data for the risk-free rate, the market risk premium, an estimate of fi ...

1 fair value determination of goodwill and calculating the

1) Fair value determination of goodwill and calculating the premium paid over market value in a merger: Using fair value accounting for goodwill, under FAS 141R, determine the amount of goodwill that "the acquiring compa ...

1 what is the difference between a significant deficiency

1) What is the difference between a significant deficiency and a material weakness as it relates to internal Control? How does the presence of one material deficiency affect the auditor's report on internal controls unde ...

Accounting theory and contemporary issues individual case

Accounting Theory and Contemporary Issues Individual case study Assignment Learning Outcomes-  Research and argue a position in regard to a contemporary issue in the accounting profession Evaluate the different areas of ...

Modified accrual accounting and general fund itemscomplete

Modified Accrual Accounting and General Fund Items Complete the following questions based on the Chapter 4 material: • Outline revenue recognition criteria under modified accrual accounting. Include specific requirements ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen