Question
In: Accounting
Shown here are condensed income statements for two different companies (both are organized as LLCs and...
Shown here are condensed income statements for two different companies (both are organized as LLCs and pay no income taxes).
| Miller Company | |||
| Sales | $ | 1,000,000 | |
| Variable expenses (80%) | 800,000 | ||
| Income before interest | 200,000 | ||
| Interest expense (fixed) | 60,000 | ||
| Net income | $ | 140,000 | |
| Weaver Company | |||
| Sales | $ | 1,000,000 | |
| Variable expenses (60%) | 600,000 | ||
| Income before interest | 400,000 | ||
| Interest expense (fixed) | 260,000 | ||
| Net income | $ | 140,000 | |
Problem 9-5A Part 5
5. What happens to each company’s net income if sales increase by 80%? (Round your answers to nearest whole percent.)
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6. What happens to each company’s net income if sales decrease by 10%? (Round your answers to nearest whole percent.)
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7. What happens to each company’s net income if sales decrease by 20%? (Round your answers to nearest whole percent.)
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8. What happens to each company’s net income if sales decrease by 40%? (Round your answers to nearest whole percent.)
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Solutions
ekkarill92 answered 2 months agoRelated Solutions
The comparative condensed income statements of Emley Corporation are shown below.
The comparative condensed income statements of Emley Corporation are shown below.
Instructions
(a) Prepare a horizontal analysis of the income statement data for Emley Corporation using 2016 as a base. (Show the amounts of increase or decrease.)
(b) Prepare a vertical analysis of the income statement data for Emley Corporation in columnar form for both years.
The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name...
The following income statements illustrate different cost
structures for two competing companies: Income Statements Company
Name Munoz Jordan Number of customers (a) 85 85 Sales revenue (a ×
$230) $ 19,550 $ 19,550 Variable cost (a × $180) N/A (15,300 )
Variable cost (a × $0) 0 N/A Contribution margin 19,550 4,250 Fixed
cost (15,300 ) 0 Net income $ 4,250 $ 4,250 Required Reconstruct
Munoz’s income statement, assuming that it serves 170 customers
when it lures 85 customers away...
Income statements for two different companies in the same industry are as follows: Trimax Inc Quintex...
Income statements for two different companies in the same
industry are as follows:
Trimax Inc Quintex Inc
Sales $500,000 $500,000
Less: Variable costs 250,000 100,000
Contribution margin 250,000 400,000
Less: Fixed Costs 200,000 350,000
Operating income 50,000 50,000
Required:
1. Compute the degree of operating leverage for each
company.
2. Compute the break-even point for each company. Explain why
the break-even point for Quintex Inc. is higher.
3. Suppose that both companies experience a 50 percent increase
in revenue. Compute...
Operating Leverage Income statements for two different companies in the same industry are as follows: Trimax,...
Operating Leverage
Income statements for two different companies in the same
industry are as follows:
Trimax, Inc.
Quintex, Inc.
Sales
$600,000
$675,000
Less: Variable costs
300,000
135,000
Contribution margin
$300,000
$540,000
Less: Fixed costs
240,000
480,000
Operating income
$60,000
$60,000
Required:
1. Compute the degree of operating leverage for
each company.
Trimax
Quintex
2. Compute the break-even point in dollars for
each company.
Trimax, Inc.
$
Quintex, Inc.
$
Why is the break-even point for Quintex, Inc., higher?
Because it...
The most recent financial statements for Zoso, Inc., are shown here (assuming no income taxes): Income...
The most recent financial statements for Zoso, Inc., are shown
here (assuming no income taxes):
Income Statement
Balance Sheet
Sales
$4,200
Assets
$15,300
Debt
$11,000
Costs
3,390
Equity
4,300
Net income
$810
Total
$15,300
Total
$15,300
Assets and costs are proportional to sales. Debt and equity are
not. No dividends are paid. Next year's sales are projected to be
$5,976.
Required:
What is the external financing needed? (Do not round
your intermediate calculations.)
The most recent financial statements for Dockett, Inc., are shown here (assuming no income taxes): Income...
The most recent financial statements for Dockett, Inc., are
shown here (assuming no income taxes):
Income Statement
Sales
$5,683
Costs
$4,258
Balance Sheet
Assets
$16,387
Debt
$8,882
Equity
?
Assets and costs are proportional to sales. Debt and equity are
not. No dividends are paid. Next year’s sales are projected to be
$7,885.
What is the external financing needed?
The most recent financial statements for Dockett, Inc., are shown here (assuming no income taxes): Income...
The most recent financial statements for Dockett, Inc., are
shown here (assuming no income taxes):
Income Statement
Sales
$7235
Costs
$4280
Balance Sheet
Assets
$16063
Debt
$8972
Equity
?
Assets and costs are proportional to sales. Debt and equity are
not. No dividends are paid. Next year’s sales are projected to be
$7709.
What is the external financing needed? (Negative amount
should be indicated by a minus sign.)
(Omit the "$" sign and commas in your response. Enter
your answer...
The most recent financial statements for Dockett, Inc., are shown here (assuming no income taxes): Income...
The most recent financial statements for Dockett, Inc., are
shown here (assuming no income taxes): Income Statement Sales $7468
Costs $4028 Balance Sheet Assets $17637 Debt $6122 Equity ? Assets
and costs are proportional to sales. Debt and equity are not. No
dividends are paid. Next year’s sales are projected to be $8681.
What is the external financing needed?
most recent financial statements for kerch inc are shown here. the Assuming no income taxes. income...
most recent financial statements for kerch inc are shown
here.
the Assuming no income taxes.
income statement
Balance Sheet
sales
$8,300
assets
$23,200
Debt
$9,00
costs
5,400
_______
Equity
14200
net
2810
Total
$23,200
Total
$23,20
income
Assets and cost are proportional to sales. Debt and equity are
not. No dividends are
paid. Next year's sales are projected to be $9545
What is the external financing needed?
The most recent financial statements for Zoso, Inc., are shown here (assuming no income taxes): Income...
The most recent financial statements for Zoso, Inc., are shown
here (assuming no income taxes):
Income Statement
Balance Sheet
Sales
$4,500
Assets
$15,300
Debt
$10,400
Costs
3,440
Equity
4,900
Net income
$1,060
Total
$15,300
Total
$15,300
Assets and costs are proportional to sales. Debt and equity are
not. No dividends are paid. Next year's sales are projected to be
$5,959.
Required:
What is the external financing needed? (Do not round
your intermediate calculations.)
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