Eastman Kodak Company is a provider of imaging technology products and services to the photographic, graphic communications,
Question:
Eastman Kodak Company is a provider of imaging technology products and services to the photographic, graphic communications, and health-care markets. A condensed 2011 income statement follows (in millions):
Sales ........................................................ $6,022
Cost of goods sold ................................... 5,135
Gross margin .............................................. 887
Other operating expenses ..................... 1,487
Loss from continuing operations ........ $ (600)
Assume that $1,400 million of the cost of goods sold is a fixed cost representing depreciation and other production costs that do not change with the volume of production. In addition, $1,000 million of the other operating expenses is fixed.
1. Compute the total contribution margin for 2011 and the contribution margin percentage. Explain why the contribution margin differs from the gross margin.
2. Suppose that sales for Eastman Kodak are predicted to increase by 10% and that the cost behavior is expected to continue. Compute the predicted operating income (loss).
3. What assumptions were necessary to compute the predicted operating income in requirement 2?
Contribution MarginContribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
Introduction to Management Accounting
ISBN: 978-0133058789
16th edition
Authors: Charles Horngren, Gary Sundem, Jeff Schatzberg, Dave Burgsta