MusicTowne sells amplifiers. Information from the quarter shows income of $800,000 and cost of goods sold as
Question:
MusicTowne sells amplifiers. Information from the quarter shows income of $800,000 and cost of goods sold as $400,000. The company has $200,000 in selling expenses, which includes a 10% commission for each amplifier sold. The company also has $100,000 in administrative expenses, 80% of which are fixed. The company buys amplifiers from several suppliers with an average price of $200, and resells them with a 100% mark-up on the price.
Requirements
1. Prepare an income statement for the quarter using the absorption costing approach.
2. Prepare an income statement for the quarter using the contribution approach.
3. How much does the sale of each amplifier contribute to covering fixed costs?
4. What is the minimum number of amplifiers MusicTowne needs to sell to break even?
Step by Step Answer:
Managerial Accounting
ISBN: 978-0134526270
3rd Canadian edition
Authors: Wendy M. Tietz, Louis Beaubien, Karen W. Braun