Morton Company's contribution format income statement for last month is given below: Sales (47,000 units $...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Morton Company's contribution format income statement for last month is given below: Sales (47,000 units $ 20 per unit) Variable expenses Contribution margin Fixed expenses Net operating income $ 940,000 658,000 282,000 225,600 $ 56,400 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $507,600 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. 2. Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. 3. Refer again to the data in (1). As a manager, what factor would be critical in deciding whether to purchase the new equipment? (Assume enough funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses would be $360,020; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $507,600 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Note: Round "Per Unit" to 2 decimal places. Morton Company Contribution Income Statement Present Proposed Amount Per Unit % Amount Per Unit % 0 $ 0.00 0 0 $ 0.00 0 $ 0 $ 0 Required 1 Required 2 > Show less Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. .1234 should be entered as 12.34). a. Degree of operating leverage b. Break-even point in dollar sales c. Margin of safety in dollars c. Margin of safety in percentage Present Proposed % % < Required 1 Required 3 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Refer again to the data in (1). As a manager, what factor would be critical in deciding whether to purchase the new equipment? (Assume enough funds are available to make the purchase.) < Required 2 Required 4 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Refer to the original data. Rather than purchase new equipment, the marketing manager argues the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses would be $360,020; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. New break even point in dollar sales < Required 3 Required 4 > Show less Morton Company's contribution format income statement for last month is given below: Sales (47,000 units $ 20 per unit) Variable expenses Contribution margin Fixed expenses Net operating income $ 940,000 658,000 282,000 225,600 $ 56,400 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $507,600 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. 2. Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. 3. Refer again to the data in (1). As a manager, what factor would be critical in deciding whether to purchase the new equipment? (Assume enough funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses would be $360,020; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $507,600 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Note: Round "Per Unit" to 2 decimal places. Morton Company Contribution Income Statement Present Proposed Amount Per Unit % Amount Per Unit % 0 $ 0.00 0 0 $ 0.00 0 $ 0 $ 0 Required 1 Required 2 > Show less Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. .1234 should be entered as 12.34). a. Degree of operating leverage b. Break-even point in dollar sales c. Margin of safety in dollars c. Margin of safety in percentage Present Proposed % % < Required 1 Required 3 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Refer again to the data in (1). As a manager, what factor would be critical in deciding whether to purchase the new equipment? (Assume enough funds are available to make the purchase.) < Required 2 Required 4 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Refer to the original data. Rather than purchase new equipment, the marketing manager argues the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses would be $360,020; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. New break even point in dollar sales < Required 3 Required 4 > Show less
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
1- What signal is produced if the sampling frequency is equal to Fm? 2- Find the range of the cutoff frequency funt for LPF required to reconstruct the original signal from the sampled one. 3- If the...
-
On January 1, 2009, Tommyboy Corporation repurchases 12,000 shares of its outstanding common stock for $26 per share. On May 1, 2009, Tommyboy sells 9,500 shares of treasury stock for $17 per share....
-
Dudley Bank has the following balance sheet and income statement. For Dudley Bank, calculate: a. Return on equity b. Return on assets c. Asset utilization d. Equity multiplier e. Profit margin f....
-
The Rankine Corporation reported net income of \($10\) million in 2016, and it appears that net income for 2017 will be the same. During 2017, the company made the following expenditures: 1....
-
On December 31, 2010, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common...
-
If Al Bundy's Year-to-Date (YTD) or cumulative earnings are $127,500 and he receives a Christmas Bonus of $2000 how much will be taken out of his current check for social security (given the maximum...
-
Please modify this base code so that it properly outputs the correct block no.'s for the following memory allocations.... - first fit - needed output for block no: 1,5,1,1,3, respectively in that...
-
A pharmacy is under contract with an insurance company for a patient who has three prescriptions. The contract states the pharmacy will be reimbursed AWP minus 1% plus a $10.50 dispensing fee per...
-
In the context of process costing, explain: (i)The concept of equivalent units; (ii)The concept and accounting treatment of normal losses without scrap value(iii)The accounting treatment of normal...
-
What are the expected next year's earnings for a company that has a stock price today of $30, has a cost of equity of 7.1%, a WACC of 6.2%, a retention rate of 25% and a return on equity of 8.54%?
-
How does the brain allocate resources across concurrent tasks, and what neurophysiological processes mediate the trade-offs inherent in multitasking ? Explain
-
Write a recursive function in Java to calculate the factorial of a given non-negative integer.
-
The company provides the following information: a). All purchases of inventory were on account .b). Sales for the year were 972,000 c). The cost of goods sold for the year was 402,000 Compute how...
-
In muscle tissue, the ratio of phosphorylase a to phosphorylase b determines the rate of conversion of glycogen to glucose 1phosphate. Classify how each event affects the rate of glycogen breakdown...
-
Extract meta-, ortho-, and para-xylenes from \(n\)-hexane using \(\beta, \beta^{\prime}-\) thiodipropionitrile as solvent. Solvent and diluent ( \(n\)-hexane) are immiscible. Feed flow rate is...
-
Your supervisor decides to test the newly hired engineer with a problem that you have not seen before. Recover p-xylene as the center cut (Figure 13-6) from a feed that is \(50.0 \mathrm{wt} \%...
-
Use Aspen Plus Analysis to develop and print out ternary diagrams for the system water-chloroform-acetone using NRTL as the LLE correlation. Compare results to experimental data in Table 13-A2 (mole...
Study smarter with the SolutionInn App