Question

In: Accounting

Arberg Company’s controller prepared the following budgeted income statement for the coming year: Sales $417,000 Variable...

Arberg Company’s controller prepared the following budgeted income statement for the coming year:


Sales	$417,000
Variable cost	287,730
Contribution margin	$129,270
Fixed cost	75,950
Operating income	$53,320

	Required:
1.	What is Arberg’s variable cost ratio? What is its contribution margin ratio?
2.	Suppose Arberg’s actual revenues are $29,900 more than budgeted. By how much will operating income increase? Give the answer without preparing a new income statement.
3.	How much sales revenue must Arberg earn to break even? Prepare a contribution margin income statement to verify the accuracy of your answer.
4.	What is Arberg’s expected margin of safety?
5.	What is Arberg’s margin of safety if sales revenue is $378,000?

Amount Descriptions

Refer to the list below for the exact wording of text items within your income statement.

Amount Descriptions
Operating income
Operating loss
Sales
Total contribution margin
Fixed cost
Variable cost

Ratios and Revenue

1. What is Arberg’s variable cost ratio? What is its contribution margin ratio?

Variable cost ratio	%
Contribution margin ratio	%

2. Suppose Arberg’s actual revenues are $29,900 more than budgeted. By how much will operating income increase?

3(a) How much sales revenue must Arberg earn to break even?

Contribution Margin Income Statement

3(b) Prepare a contribution margin income statement to verify the accuracy of your answer. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement.

Arberg Company

Contribution Margin Income Statement

For the Coming Year

1
2
3
4
5

Margin of Safety

4. What is Arberg’s expected margin of safety?

5. What is Arberg’s margin of safety if sales revenue is $378,000?

Expert Solution

ekkarill92 answered 3 years ago

Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as...

Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 25,000,000 Manufacturing expenses: Variable $ 11,250,000 Fixed overhead 3,500,000 14,750,000 Gross margin 10,250,000 Selling and administrative expenses: Commissions to agents 3,750,000 Fixed marketing expenses 175,000 * Fixed administrative expenses 2,160,000 6,085,000 Net operating income 4,165,000 Fixed interest expenses 875,000 Income before income taxes 3,290,000 Income taxes (30%) 987,000 Net income...

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute...

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $218,000. Sales (58,000 units) $ 986,000 Costs: Direct materials $ 160,800 Direct labor 240,800 Fixed factory overhead 104,000 Variable factory overhead 150,800 Fixed marketing costs 110,800 Variable marketing costs 50,800 / 818,000 Pretax income $ 168,000 32,545. 134,970. 65,576. 50,800. 172,394.

Once the budgeted income statement is prepared, the ____ budget must be prepared prior to the...

Once the budgeted income statement is prepared, the ____ budget must be prepared prior to the prepartion of the budgeted balance sheet. a) cash b) sales c) operating expense d) purchases

Crosby ltd has prepared the following flexible budget for the coming year. The budgeted level of...

Crosby ltd has prepared the following flexible budget for the coming year. The budgeted level of activity is 5,000 units sales 125,000 Direct material 37,5000 Direct labour 30,000 Variable overheads 15,000 Fixed overheads 20,000 profit 22,000 If the budget is flexed to a level of activity of 7,500 units, what would be the budgeted total cost be?

Joyner Company’s income statement for Year 2 follows: Joyner Company’s Income Statement Sales $ 790,000 Cost...

Joyner Company’s income statement for Year 2 follows: Joyner Company’s Income Statement Sales $ 790,000 Cost of goods sold 406,000 Gross margin 384,000 Selling and administrative expenses 216,000 Net operating income 168,000 Nonoperating items: Gain on sale of equipment 6,000 Income before taxes 174,000 Income taxes 52,200 Net income $ 121,800 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Joyner Company's Balance Sheet Year 2 Year 1 Assets Cash $ 221,000 $ 207,500...

Joyner Company’s income statement for Year 2 follows: Joyner Company’s Income Statement Sales $ 797,000 Cost...

Joyner Company’s income statement for Year 2 follows: Joyner Company’s Income Statement Sales $ 797,000 Cost of goods sold 411,000 Gross margin 386,000 Selling and administrative expenses 217,000 Net operating income 169,000 Nonoperating items: Gain on sale of equipment 6,000 Income before taxes 175,000 Income taxes 70,000 Net income $ 105,000 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Joyner Company's Balance Sheet Year 2 Year 1 Assets Cash $ 195,300 $ 191,500...

Delcon Incorporation is prepared to report the following income statement for the year 2019. Sales 1,52,00,000...

Delcon Incorporation is prepared to report the following income statement for the year 2019. Sales 1,52,00,000 Less, operating cost 1,19,00,000 EBIT 33,00,000 Less, interest 3,00,000 Earning before tax 30,00,000 Les, Tax @ 40% 12,00,000 Net income 18,00,000Prior to reporting these income statements, the company wants to determine its annual dividend. The company has 5,00,000 shares of stock outstanding and its stock trades at Rs 48 per share. a. The company had a 40% dividend payout ratio in 2018. If the...

“Mick’sproducts”has prepared the following production budget for the coming year Normal and budgeted capacity 10,000...

“Mick’sproducts”has prepared the following production budget for the coming year Normal and budgeted capacity 10,000 units Directmaterial $120000 Directlabour $70000 Variable factory overhead $ 30 000 Fixed factory overhead $ 20 000 Require Calculate the budgeted unit cost of production using absorption costing and direct costing “Mick” sales for the year were 8,000 units and production was 10,000 units as budgeted Calculate ending inventory

Brief Exercise 24-9 Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming...

Brief Exercise 24-9 Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming year are $146,660,000 and $90,630,000, respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 8 times a year to a level of 12 times per year. Compute its expected cost savings for the coming year. Expected Cost Savings $

The budgeted income statement is typically prepared before the budgeted balance sheet. True False