Problem 2-29 (Algo) Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [L02-4, LO2-5, L02-7, L02-8] Morton Company's contribution format income statement for last month is given below: Sales (48,666 units x $22 per unit) $ 1,656,666 Variable expenses 739,266 Contribution margin 316,866 Fixed expenses 253,446 Net operating income $ 63,360 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 $6.60 per unit. However, fixed expenses would increase to a total of $570,240 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 breakeven 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 paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that 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 $541,728; 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 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 breakeven point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (Le. .1234 should be entered as 12.34).) Degree of operating leverage Break-even point in dollar sales Margin of safety in dollars lpli'li' Margin of safety in percentage ( Required'l Required3 > Problem 2-29 (Algo) Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [L02-4, L02-5, L02-7, L02-8] Morton Company's contribution format income statement for last month is given below: Sales (48,999 units x $22 per' unit) $ 1,956,999 Variable expenses 739,299 Contribution margin 316,899 Fixed expenses 253,449 Net operating income 5 63,369 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 $6.60 per unit. However, fixed expenses would increase to a total of$570,240 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 paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that 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 xed expenses would be $541,728; and its net operating income would increase by 20%. Compute the company's breakeven 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 Refer again to the data in (1). As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.) OCyolical movements in the economy OReserves and surplus of the company OPerl'ormance of peers in the industry OStock level maintained ( Required2 Required4 > Problem 2-29 (Algo) Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [L02-4, L02-5, L02-7, L02-8] Morton Company's contribution format income statement for last month is given below: Sales (48,669 units x $22 per unit) 5 1,856,800 Variable expenses 739,260 Contribution margin 316,866 Fixed expenses 253,440 Net operating income $ 63,369 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 $6.60 per unit. However, fixed expenses would increase to a total of $570,240 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 breakeven 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 (i). As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that 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 $541,728; 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 Refer to the original data. Rather than purchase new equipment, the marketing manager argues that 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 xed 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 xed expenses would be $541,728; and its net operating income would increase by 20%. Compute the company's breakeven point in dollar sales under the new marketing strategy. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) ( Required 3 Show lessA Problem 2-29 (Algo) Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [L02-4, L02-5, L02-7, L02-8] Morton Company's contribution format income statement for last month is given below: Sales (48,666 units x $22 per unit) $ 1,656,666 Variable expenses 739,269 Contribution margin 316,866 Fixed expenses 253,446 Net operating income 53 63,369 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, prots 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 $6.60 per unit. However, fixed expenses would increase to a total of $570,240 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 paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that 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 $541,728; and its net operating income would increase by 20%. Compute the company's breakeven point in dollar sales under the new marketing strategy. Complete this question by entering your answers in the tabs below. Required 1 Required 2 H 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 $6.60 per unit. However, xed expenses would increase to a total of $570,240 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. (Round "Per Unit" to 2 decimal places.) Show lessA "/0 % % % % % Problem 3-16 (Algo) Plantwide Predetermined Overhead Rates; Pricing [L03-1, LO3-2, LO3-3] Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates: Direct laborhours required to support estimated production 155,660 Machinehours required to support estimated production 77,589 Fixed manufacturing overhead cost $465,669 Variable manufacturing overhead cost per direct laborhour $ 4.89 Variable manufacturing overhead cost per machine-hour $ 9.60 During the year, Job 550 was started and completed. The following information is available with respect to thisjob: Direct materials $ 210 Direct labor cost $ 349 Direct laborhours 15 Machinehours 5 l Required: 1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? 2. Assume that Landen's controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? (Round your intermediate calculations to 2 decimal places. Round your Predetermined Overhead Rate answers to 2 decimal places and all other answers to the nearest whole dollar.) 1. Direct laborhours: a. Predetermined overhead rate per DLH Total manufacturing cost of Job 550 c. Selling price 2. Machine-hours: a. Predetermined overhead rate per MH Total manufacturing cost of Job 550 c. Selling price