Estimate the change in the company's net operating income if it were to increase itsby $1,000.cmEXERCISE 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and volume [LO5-41Data for Hermann Corporation are shown below:Per UnitPercent of Sales$90100%Selling price . . . .Variable expenses . .6370Contribution margin . . .$2730%Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Cost-Volume-Profit RelationshipsRequired:1.The marketing manager argues that a $5,000 increase in the monthly advertising budget wouldincrease monthly sales by $9,000. Should the advertising budget be increased?2. Refer to the original data. Management is considering using higher-quality components thatwould increase the variable expense by $2 per unit. The marketing manager believes that thehigher-quality product would increase sales by 10% per month. Should the higher-qualitycomponents be used?

Computation of Current Net Income

Answered: Estimate the change in the company's…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Variable costs as a percentage of sales for Lemon Inc. are 73%, current sales are $647,000, and fixed costs are $190,000. How much will operating income change if sales increase by $37,200? a. $10,044 increase b. $27,156 increase c. $27,156 decrease d. $10,044 decrease
Company XYZ is currently making sales of $200,000. At this level, the variable expenses were $160,000. Assume that company XYZ expects sales to increase to $450,000 in the coming period with no change is expected to fixed expenses. How much is the expected change in profit? a. Cannot be determined O b. Increase by $160,000 O c. Increase by $10,000 d. Increase by $50,000 е. Increase by 40,000
Multiple Choice Practice Questions-Differential Analysis 1. The condensed income statement for a Fletcher Inc. for the past year is as follows: Sales Costs: Variable costs Fixed costs Total costs Income (loss) F $300,000 b. $30,000 increase c. $20,000 decrease d. $30,000 decrease Product G $210,000 H $340,000 $180,000 $180,000 $220,000 50,000 50,000 40,000 $230,000 $230,000 $260,000 $70,000 $ (20,000) $80,000 Total $850,000 $580,000 140,000 $720,000 $130,000 Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Products F and H. What is the amount of change in net income for the current year that will result from the discontinuance of Product G? a. $20,000 increase
Spice Inc.'s unit selling price is $46, the unit variable costs are $31, fixed costs are $106,000, and current sales are 9,600 units. How much will operating income change if sales increase by 5,600 units? a. $144,000 decrease Ob. $228,000 increase Oc. $144,000 increase Od. $84,000 increase
Question 3:salalah Company's financial information is given in the table below. Year 2020 Sales (OMR) Fixed Costs 445000 Variable Costs: 105000 245000 2021 500000 150000 280000 You are required to calculate the following values for each year. The years are independent of each other. a) P/V ratio, b) В.Е.Р. c) Sales required to earn a profit of OMR 45000. d) Margin of safety at a profit of OMR 50000 e) Profit when sales are OMR. 300000.
Company XYZ is currently making sales of $200,000. At this level, the variable expenses viere $160,000 . Assume that company XYZ expects sales to increase to $450,003 in coming period with no change is expected to fixed expenses. How much is the expected change in profit ? a- Increase by $ 10,000 b -Increase by 40,000 C- increase by $ 50,000 D-be determined E- Increase by $160,000
11. George Corporation has the following information for the current year: Selling price per unit Variable costs per unit 10.00 $ 6.00 $1,000.00 Fixed costs Required: Prepare a cost-volume-profit graph identifying the following items: Total fixed costs line Total variable costs line Total costs line Total revenues line Breakeven point in sales dollars Breakeven point in units Profit area Loss area А. В. С. D. E. F. G. Н. 6,000 5,000 4,000 3,000 2,000 1,000 100 200 300 400 500 Qty (# Units) 3 Dollars ($)
Variable costs as a percentage of sales for Lemon Inc. are 79%, current sales are $653,000, and fixed costs are $195,000. How much will operating income change if sales increase by $43,800? a.$34,602 increase b.$9,198 increase c.$34,602 decrease d.$9,198 decrease
Variable costs as a percentage of sales for Lemon Inc. are 77%, current sales are $601,000, and fixed costs are $202,000. How much will operating income change if sales increase by $36,800? a.$8,464 increase b.$28,336 decrease c.$28,336 increase d.$8,464 decrease
Sales (18,00e units) Variable expenses Contribution margin Fixed expenses $ 368,008 144,e00 216,eee 188,eee $ 36,000 Operating incone Required: Answer each question Independently based on the original data: 1. What is the product's CM ratio? 2 Use the CM ratio to determine the break-even polnt in sales dollars.
Variable costs as a percentage of sales for Lemon Inc. are 66%, current sales are $534,000, and fixed costs are $188,000. How much will operating income change if sales increase by $49,900? a. $32,934 decrease b. $16,966 decrease c. $32,934 increase d. $16,966 increase
Q1. Sales (30,000 units) Tk.15,00,000 Tk.50 Variable Expense 12,00,000 40 Contribution Margin 300,000 Tk. 10 Fixed Expenses 220,000 Net Operating Income 80,000 Refer to original data. Compute company’s margin of safety in both dollar and percentage form. Compute company’s degree of operating leverage at present level of sales. 7. If sales increase by 7.5%, by what percentage would you expect net operating income to increase?

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