Please see the below for a fictitious example of consideration of balanced scorecard performance measures.

For each measure, indicate whether it would most like be classified in the learning and growth, internal business process, customer, or financial category of the company's balance scorecard.

Europa Publications, Inc. specializes in reference books that keep abreast of the rapidly changing political and economic issues in Europe. The results of the company’s operations during the prior year are given in the following table. All units produced during the year were sold. (Ignore income taxes.)

Required:

1-a. Prepare a traditional income statement for the company.

1-b. Prepare a contribution income statement for the company.

2. What is the firm’s operating leverage for the sales volume generated during the prior year?

3. Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income?

4. Which income statement would an operating manager use to answer requirement (3)?

Req. 1-a.

Req. 1-b.

Req. 2

What is the firm’s operating leverage for the sales volume generated during the prior year? (Round your answer to 2 decimal places.)

Req. 3

Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income? (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Req. 4

Which income statement would an operating manager use to answer requirement (3)?

Europa Publications, Inc. specializes in reference books that keep abreast of the rapidly changing political and economic issues in Europe. The results of the company’s operations during the prior year are given in the following table. All units produced during the year were sold. (Ignore income taxes.)

Required:

1-a. Prepare a traditional income statement for the company.

1-b. Prepare a contribution income statement for the company.

2. What is the firm’s operating leverage for the sales volume generated during the prior year?

3. Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income?

4. Which income statement would an operating manager use to answer requirement (3)?

Req. 1A

Req. 1B

Req. 2

What is the firm’s operating leverage for the sales volume generated during the prior year? (Round your answer to 2 decimal places.)

Req. 3

Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income? (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Req. 4

Which income statement would an operating manager use to answer requirement (3)?

Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.

A five-year casualty insurance policy was purchased at the beginning of 2016 for $33,000. The full amount was debited to insurance expense at the time.

Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $604,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $120,000. Declining real estate values in the area indicate that the salvage value will be no more than $30,000.

On December 31, 2017, merchandise inventory was overstated by $23,000 due to a mistake in the physical inventory count using the periodic inventory system.

The company changed inventory cost methods to FIFO from LIFO at the end of 2018 for both financial statement and income tax purposes. The change will cause a $940,000 increase in the beginning inventory at January 1, 2019.

At the end of 2017, the company failed to accrue $15,100 of sales commissions earned by employees during 2017. The expense was recorded when the commissions were paid in early 2018.

At the beginning of 2016, the company purchased a machine at a cost of $680,000. Its useful life was estimated to be ten years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2017, was $435,200. On January 1, 2018, the company changed to the straight-line method.

Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.70% is a better indication of the actual cost. Management effects the change in 2018. Credit sales for 2018 are $3,600,000; in 2017 they were $3,300,000.

Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2018 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund income tax.

Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.

1. A five-year casualty insurance policy was purchased at the beginning of 2016 for $39,500. The full amount was debited to insurance expense at the time.
2. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $636,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000.
3. On December 31, 2017, merchandise inventory was overstated by $29,500 due to a mistake in the physical inventory count using the periodic inventory system.
4. The company changed inventory cost methods to FIFO from LIFO at the end of 2018 for both financial statement and income tax purposes. The change will cause a $1,005,000 increase in the beginning inventory at January 1, 2019.
5. At the end of 2017, the company failed to accrue $16,400 of sales commissions earned by employees during 2017. The expense was recorded when the commissions were paid in early 2018.
6. At the beginning of 2016, the company purchased a machine at a cost of $810,000. Its useful life was estimated to be ten years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2017, was $518,400. On January 1, 2018, the company changed to the straight-line method.
7. Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.75% is a better indication of the actual cost. Management effects the change in 2018. Credit sales for 2018 are $4,900,000; in 2017 they were $4,600,000.

Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2018 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund income tax.

Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.

A five-year casualty insurance policy was purchased at the beginning of 2016 for $35,000. The full amount was debited to insurance expense at the time.

Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $600,000 on December 29, 2007, and has been depreciated on a straigh-tline basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000.

On December 31, 2017, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the periodic inventory system.

The company changed inventory cost methods to FIFO from LIFO at the end of 2018 for both financial statement and income tax purposes. The change will cause a $960,000 increase in the beginning inventory at January 1, 2019.

At the end of 2017, the company failed to accrue $15,500 of sales commissions earned by employees during 2017. The expense was recorded when the commissions were paid in early 2018.

At the beginning of 2016, the company purchased a machine at a cost of $720,000. Its useful life was estimated to be ten years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2017, was $460,800. On January 1, 2018, the company changed to the straight-line method.

Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.75% is a better indication of the actual cost. Management effects the change in 2018. Credit sales for 2018 are $4,000,000; in 2017 they were $3,700,000.

Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2018 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund income tax.
  

Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.

A five-year casualty insurance policy was purchased at the beginning of 2016 for $37,500. The full amount was debited to insurance expense at the time.

Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $640,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $120,000. Declining real estate values in the area indicate that the salvage value will be no more than $30,000.

On December 31, 2017, merchandise inventory was overstated by $27,500 due to a mistake in the physical inventory count using the periodic inventory system.

The company changed inventory cost methods to FIFO from LIFO at the end of 2018 for both financial statement and income tax purposes. The change will cause a $985,000 increase in the beginning inventory at January 1, 2019.

At the end of 2017, the company failed to accrue $16,000 of sales commissions earned by employees during 2017. The expense was recorded when the commissions were paid in early 2018.

At the beginning of 2016, the company purchased a machine at a cost of $770,000. Its useful life was estimated to be ten years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2017, was $492,800. On January 1, 2018, the company changed to the straight-line method.

Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.70% is a better indication of the actual cost. Management effects the change in 2018. Credit sales for 2018 are $4,500,000; in 2017 they were $4,200,000.

Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2018 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund income tax.

Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.

1. A five-year casualty insurance policy was purchased at the beginning of 2016 for $38,000. The full amount was debited to insurance expense at the time.
2. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $624,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000.
3. On December 31, 2017, merchandise inventory was overstated by $28,000 due to a mistake in the physical inventory count using the periodic inventory system.
4. The company changed inventory cost methods to FIFO from LIFO at the end of 2018 for both financial statement and income tax purposes. The change will cause a $990,000 increase in the beginning inventory at January 1, 2019.
5. At the end of 2017, the company failed to accrue $16,100 of sales commissions earned by employees during 2017. The expense was recorded when the commissions were paid in early 2018.
6. At the beginning of 2016, the company purchased a machine at a cost of $780,000. Its useful life was estimated to be ten years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2017, was $499,200. On January 1, 2018, the company changed to the straight-line method.
7. Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.75% is a better indication of the actual cost. Management effects the change in 2018. Credit sales for 2018 are $4,600,000; in 2017 they were $4,300,000.

Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2018 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund income tax.

Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.

1. A five-year casualty insurance policy was purchased at the beginning of 2016 for $35,000. The full amount was debited to insurance expense at the time.
2. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $600,000 on December 29, 2007, and has been depreciated on a straigh-tline basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000.
3. On December 31, 2017, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the periodic inventory system.
4. The company changed inventory cost methods to FIFO from LIFO at the end of 2018 for both financial statement and income tax purposes. The change will cause a $960,000 increase in the beginning inventory at January 1, 2019.
5. At the end of 2017, the company failed to accrue $15,500 of sales commissions earned by employees during 2017. The expense was recorded when the commissions were paid in early 2018.
6. At the beginning of 2016, the company purchased a machine at a cost of $720,000. Its useful life was estimated to be ten years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2017, was $460,800. On January 1, 2018, the company changed to the straight-line method.
7. Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.75% is a better indication of the actual cost. Management effects the change in 2018. Credit sales for 2018 are $4,000,000; in 2017 they were $3,700,000.

Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2018 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund income tax.

Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.

1. A five-year casualty insurance policy was purchased at the beginning of 2016 for $30,500. The full amount was debited to insurance expense at the time.
2. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $574,000 on December 29, 2007, and has been depreciated on a straight-line basis assuming a useful life of 40 years and a salvage value of $110,000. Declining real estate values in the area indicate that the salvage value will be no more than $27,500.
3. On December 31, 2017, merchandise inventory was overstated by $20,500 due to a mistake in the physical inventory count using the periodic inventory system.
4. The company changed inventory cost methods to FIFO from LIFO at the end of 2018 for both financial statement and income tax purposes. The change will cause a $915,000 increase in the beginning inventory at January 1, 2019.
5. At the end of 2017, the company failed to accrue $14,600 of sales commissions earned by employees during 2017. The expense was recorded when the commissions were paid in early 2018.
6. At the beginning of 2016, the company purchased a machine at a cost of $630,000. Its useful life was estimated to be ten years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2017, was $403,200. On January 1, 2018, the company changed to the straight-line method.
7. Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.80% is a better indication of the actual cost. Management effects the change in 2018. Credit sales for 2018 are $3,100,000; in 2017 they were $2,800,000

Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2018 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund income tax.