The manager of Royal Industries Ltd. is confused by the income statement he has received from his
Question:
The manager of Royal Industries Ltd. is confused by the income statement he has received from his accountant. He is particularly concerned that his return on sales declined much more than sales in February as compared to January.
Income Statement
The manager informs you that in salaries, wages, and commissions, the accountant included the salaries of several clerks and himself. All salesmen work on commissions @ 20 per cent of sales. Expenses on account of supplies vary directly with sales. For various reasons, sales in February were expected to decline by ₹75,000. But he had expected income of ₹52,912.50 on sales of ₹3,75,000 @ 14.11 per cent.
You are required to explain the income differences to the manager by using contribution based income statement.
Step by Step Answer:
Management Accounting Text Problems And Cases
ISBN: 9781259026683
6th Edition
Authors: M Y Khan, P K Jain