Question

In: Accounting

1. Consider the following company. Revenues: 500 Variable costs 250 Fixed costs 100 Operating Income 150...

1. Consider the following company.

Revenues: 500

Variable costs 250

Fixed costs 100

Operating Income 150

1. Assuming that volume increases 10%, what will revenues, variable costs and fixed

costs be in year 2? What will operating income be? What will the operating margin

be in year 2?

2. Assume in the example above that variable costs were 150 and fixed costs were

200. What will revenues, variable costs and fixed costs be in year 2? What will the

operating margin be in year 2?

Solutions

Expert Solution

Answer-1:

Year-1 Year-2
Revenue                  500                  550
Less: Variable costs                  250                  275
Contribution margin                  250                  275
Less: Fixed cost                  100                  100
Operating income                  150                  175
Operating margin (Operating income/Revenue*100) 30% 32%

Variable cost to sales percentage = 250/500*100 = 50%

Formula:

Answer-2:

Year-1 Year-2
Revenue                500                 550
Less: Variable costs                150                 165
Contribution margin                350                 385
Less: Fixed cost                200                 200
Operating income                150                 185
Operating margin 30% 34%

Variable cost to sales percentage = 150/500*100 = 30%

Formula:

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Consider the following company. Revenues: 500 Variable Costs: 250 Fixed Costs: 100 Operating Income: 150 Assuming...
Consider the following company. Revenues: 500 Variable Costs: 250 Fixed Costs: 100 Operating Income: 150 Assuming that volume increases 10%, what will revenues, variable costs, and fixed costs be in year 2? What will operating income be? What will the operating margin be in year 2? Assume in the example above that variable costs were 150 and fixed costs were 200. What will revenues, variable costs and fixed costs be in year 2? What will the operating margin be in...
. Fixed Costs, Variable Costs, Total Costs, Revenues are used to estimate profitability. This is an...
. Fixed Costs, Variable Costs, Total Costs, Revenues are used to estimate profitability. This is an intersection with Economics and Accounting. Explain how they are derived and used for both disciplines.
XYZ Company makes 250 widgets. The variable costs are $36.80 per unit and fixed costs are...
XYZ Company makes 250 widgets. The variable costs are $36.80 per unit and fixed costs are $31.20 per unit; however, $22.60 in fixed costs per unit is unavoidable. What is the effect on net income if the company instead buys the widgets from an outside supplier for $47.00 per unit? Decrease of $5,250 Increase of $400 Decrease of $400 Increase of $5,250
Degree of operating leverage   Grey Products has fixed operating costs of $390,000​, variable operating costs of...
Degree of operating leverage   Grey Products has fixed operating costs of $390,000​, variable operating costs of $16.35 per​ unit, and a selling price of $63.44 per unit. a. Calculate the operating breakeven point in units. b. Calculate the​ firm's EBIT at 9,000​, 10,000​, and 11,000 ​units, respectively. c. With 10,000 units as a​ base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part ​(b​)? d....
Degree of operating leverage   Grey Products has fixed operating costs of $390,000​, variable operating costs of...
Degree of operating leverage   Grey Products has fixed operating costs of $390,000​, variable operating costs of $16.06 per​ unit, and a selling price of $63.54 per unit. a. Calculate the operating breakeven point in units. b. Calculate the​ firm's EBIT at 11,000​, 13,000​, and 15,000 ​units, respectively. c. With 13,000 units as a​ base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part ​(b​)? d....
Fixed costs are $3,000, variable costs are $5 per unit. The company will manufacture 100 units...
Fixed costs are $3,000, variable costs are $5 per unit. The company will manufacture 100 units and chart a 50% markup. Using the cost-plus pricing method, what will the selling price be?
1)If fixed costs =100, variable costs = 50, and quantity equals 20, then what would the...
1)If fixed costs =100, variable costs = 50, and quantity equals 20, then what would the average variable cost equal? 2,3)Given the above information, what would the average total and average fixed cost be? 4)fixed costs? A)vary in the short run, B)vary with output level, C) do not vary with output level d) are the same as variable costs 5)We compute the marginal product of labor using which of the following formulas: Group of answer choices change in total output...
1.The different aspects of variable costs, fixed costs, and mixed costs. (Consider how they behave in...
1.The different aspects of variable costs, fixed costs, and mixed costs. (Consider how they behave in regards to both total costs and unit costs.) 2.Discuss their behavior in regards to the relevant range. Please write a paragraph for each so I can understand a little better.
Assuming volume decreases 10%, what will revenues, variable costs and fixed costs be in year 2?
Consider the same company one more time:Revenues: 500Variable Costs 250Fixed Costs 1001. Assuming volume decreases 10%, what will revenues, variable costs and fixed costsbe in year 2? What will operating income be? What will the operating margin be inyear 2?2. Assume in the above that variable costs were 150 and fixed costs were 200.What will revenues, variable costs and fixed costs be in year 2? What will theoperating margin be in year 2?
Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable, fixed, or...
Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable, fixed, or mixed. Identify the activity and the associated activity driver that allow you to define the cost behavior. For example, assume that the resource input is “cloth in a shirt." The activity would be "sewing shirts," the cost behavior "variable," and the activity driver "units produced." Prepare your answers in the following format: Activity Cost Behavior Activity Driver a. Flu vaccine Assembling Delivering orders Filing...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT