Product Planning with Taxes
Assume that last year, Cliff Consulting, a firm in Berkeley, CA, had the following contribution income statement:

(a) Determine the annual break-even point in sales revenue.

Round contribution margin ratio to two decimal places for your calculation. Round final answer to nearest dollar.
$Answer

(b) Determine the annual margin of safety in sales revenue.

Use rounded answer from above for calculation.
$Answer

(c) What is the break-even point in sales revenue if management makes a decision that increases fixed costs by $80,000?

Use rounded contribution margin ratio (2 decimal places) for your calculation.
Round your answer to the nearest dollar.
$Answer

(d) With the current cost structure, including fixed costs of $440,000, what dollar sales revenue is required to provide an after-tax net income of $250,000?

Use rounded contribution margin (2 decimal places) for calculation. Round your answer to the nearest dollar.
$Answer

(e) Prepare an abbreviated contribution income statement to verify that the solution to requirement (d) will provide the desired after-tax income.

Use rounded contribution margin (2 decimal places) for variable cost/contribution margin computations. Round your answers to the nearest dollar.
Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers.

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

Amount Descriptions

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

Ratios and Revenue

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?

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.

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?

The performance report compares data from Remember When’s Inc. static master budget with the actual costs of its Watch Division for the year ended December 31.

Remember When, Inc.

Performance Report-Watch Division

For the Year Ended December 31

* Budgeted costs are based on an output of 17,500 units.

† Actual output was 19,100 units.

Actual costs exceeded budgeted costs by $5,539, or 7.4 percent. On the face of it, most managers would consider such a cost overrun significant. But was there really a cost overrun? The budgeted amounts are based on sales of 17,500 units at $8 each; however, actual sales was 19,100 units for a total sales of $143,250. “Remember When, Inc. uses a Just In Time inventory system and thus does not have any beginning or ending inventory. Output are units sold.

Required:

Construct a flexible budged performance report and explain activity (volume), revenue, and spending variances.

Check Figures: Activity (Volume) Variance – Revenue 12,800F, Variable Costs 5,936U,

Net Income 6,864F

                        Revenue Variance – 9,550U

Spending Variance – Total Variable Costs 97F,

                             - Total Fixed Costs 300F

Activity (volume) generated $6,864 additional profit, but the revenue variance was unfavorable by $9,550. Fixed and variable costs were close to flexible budge amounts, so income is down overall due to poor revenue management

The trial balance columns of the worksheet for Swifty Company at June 30, 2022, are as follows.

Other data:

Complete the worksheet.

Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small portable gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q expects to sell 14,700 portable grills, 53,900 stationary grills, and 4,900 smokers. Information on the three models is as follows:

Total fixed cost is $2,026,500.

Multiple Product Planning with Taxes
In the year 2017, Pyramid Consulting had the following contribution income statement:

(a) Determine the annual break-even point in sales revenue.

Round contribution margin ratio to two decimal places for your calculation. Round final answer to nearest dollar.  
$Answer

(b) Determine the annual margin of safety in sales revenue.

Use rounded answer from above for calculation.
$Answer

(c) What is the break-even point in sales revenue if management makes a decision that increases fixed costs by $57,000?

Use rounded contribution margin ratio (2 decimal places) for your calculation.
$Answer

(d) With the current cost structure, including fixed costs of $285,000, what dollar sales revenue is required to provide an after-tax net income of $200,000?

Use rounded contribution margin (2 decimal places) for calculation. Round your answer to the nearest dollar.  
$Answer

(e) Prepare an abbreviated contribution income statement to verify that the solution to requirement (d) will provide the desired after-tax income.

Use rounded contribution margin (2 decimal places) for variable cost/contribution margin computations. Round your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers.

The Palace Theater opened on April 1. All facilities were completed on March 31. At this time, the ledger showed No. 101 Cash $6,000, No. 140 Land $12,000, No. 145 Buildings (concession stand, projection room, ticket booth, and screen) $8,000, No. 157 Equipment $6,000, No. 201 Accounts Payable $2,000, No. 275 Mortgage Payable $10,000, and No. 311 Common Stock $20,000. During April, the following events and transactions occurred.

In addition to the accounts identified above, the chart of accounts shows No. 112 Accounts Receivable, No. 136 Prepaid Rent, No. 400 Service Revenue, No. 429 Rent Revenue, No. 610 Advertising Expense, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.

A. Enter the beginning balances in the ledger as of April 1

b.Journalize the April transactions. Palace records admission revenue as service revenue, rental of the concession stand as rent revenue, and film rental expense as rent expense.

c.Post the April journal entries to the ledger.

d.Prepare a trial balance on April 30, 2017.

Implementing change in any organization can be a daunting task. change is inevitable, and organizations need to embrace a culture of change for long term survival. However not all changes are worthwhile. Blindly implementing change can result in sub-optimal performance and in some cases, it can diminish performance. Change initiatives must be evaluated from a business perspective. Consider an example of an automobile dealership is evaluating a new protocol in their auto-service department. The service department generates more revenue than the sales department, on an annualized basis. Sales revenues have been down in recent years, and management would like to find ways to increase service revenue to offset any shortfalls from the sales department. The service department has proposed to senior management that they can make a change to their service offerings to increase revenue. Currently, the service department offers ala carte offerings for service. Patrons can opt for separate services on an as needed basis (e.g. oil, change, spark plug change, timing belt service, transmission service and so on). A key change proposed would involve offering packaged service solutions (e.g. 10K mileage service, 30K mileage service, 75K mileage service, and so on). Each package service would bundle many of the previously offered services. If implemented, the change could yield an extra $1M of service revenue for the dealership. Without this change, substantially growing service revenue would be very unlikely for the dealership. The change implementation will involve having to re-market its services appropriately, changing advertising, increasing promotions, training staff, and so on, They would have to do so without making long-time customers feel like they are being offered more services than then need at any given time. How should the dealership go about evaluating this change? Should they embark on this change? Please explain your answer sufficiently.