Question

In: Finance

Classify the indicated costs as being fixed, semivariable, or variable in nature. Net sales $8,741,685 Cost...

Classify the indicated costs as being fixed, semivariable, or variable in nature.

Net sales $8,741,685
Cost of goods sold:
Direct materials 2,622,506 Variable Cost   
Direct labor 2,098,004 Variable Cost   
Overhead expenses:
Depreciation on manufacturing equipment 437,084 Fixed Cost   
Electric utility expense 262,251 Semivariable Cost   
Total cost of goods sold 5,419,845
Gross profit 3,321,840
Operating expenses:
Sales commission expense 174,834 Variable Cost   
Depreciation on buildings and property 874,169 Fixed Cost   
Total operating expenses 1,049,003
Earnings before interest and taxes (EBIT) 2,272,837
Interest expense 874,169 Fixed Cost   
Earnings before taxes (EBT) 1,398,668
Taxes (40%) 559,467 Variable Cost   
Net income $839,201
Preferred stock dividends 139,867 Fixed Cost   
Earnings available to common shareholders $699,334

Income Statement

for the Year Ending December 31
Net sales $8,741,685
Less: Variable operating costs ?
  Fixed operating costs ?
Total operating costs ?
Earnings before interest and taxes (EBIT) 2,272,837
Less: Fixed capital costs ?
Earnings before taxes (EBT) 1,398,668
Less: Income taxes (Variable, 40%) ?
Earnings after taxes (EAT) $839,201
Less: Fixed capital costs (preferred stock dividends) ?
Earnings available to common shareholders ?
Earnings per share (EPS) — 100,000 shares ?

Solutions

Expert Solution

Variable operating costs = Direct Material+Direct Labour+Electric Utility Expense+Sales commission expense

= 2622506+2098004+262251+174834

=5157595

Fixed Operating Costs = Depreciation on manufacturing equipment+Dspreciation on buildings and property

=437084+874169

=1311253

Income statement for the year ended December 31:

Particulars Amount
Net Sales 8741685
(-) Variable operating costs 5157595
(-) Fixed operating costs 1311253
Earning before interest and taxes (EBIT) 2272837
(-) Fixed Capital coss 874169
Earning before taxes (EBT) 1398668
(-)Income Taxes (Variable,40%) (1398668*40%) 559467
Earning after taxes (EAT) 839201
(-)Fixed capital costs (preferred stock dividends) 139867
Earnings available to common shareholders 699334
No.of shares 100000
Earning per share (EPS) 6.99

Earning per share (EPS) = Earnings available to common shareholders/No.of shares

= 699334/100000

= 6.99

jeff jeffy answered 3 years ago
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