Problem 5A-7 Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10]
Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company’s income statements for the three most recent months follow:
|
Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 |
|||||||||||
| July | August | September | |||||||||
| Sales in units | 5,500 | 6,000 | 6,500 | ||||||||
| Sales | $ | 577,500 | $ | 630,000 | $ | 682,500 | |||||
| Cost of goods sold | 346,500 | 378,000 | 409,500 | ||||||||
| Gross margin | 231,000 | 252,000 | 273,000 | ||||||||
| Selling and administrative expenses: | |||||||||||
| Advertising expense | 24,200 | 24,200 | 24,200 | ||||||||
| Shipping expense | 57,000 | 60,200 | 63,400 | ||||||||
| Salaries and commissions | 104,000 | 110,600 | 117,200 | ||||||||
| Insurance expense | 9,200 | 9,200 | 9,200 | ||||||||
| Depreciation expense | 19,600 | 19,600 | 19,600 | ||||||||
| Total selling and administrative expenses | 214,000 | 223,800 | 233,600 | ||||||||
| Net operating income | $ | 17,000 | $ | 28,200 | $ | 39,400 | |||||
Required:
1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed.
2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bX.
3. Redo the company’s income statement at the 6,500-unit level of activity using the contribution format.
In: Accounting
Presented below is information related to Pronghorn Company.
Cost Retail Beginning inventory $ 54,510 $96,300 Purchases (net) 122,230 194,700 Net markups 9,740 Net markdowns 25,731 Sales revenue 203,890
Compute the ending inventory at retail. Ending inventory $
Compute a cost-to-retail percentage under the following conditions. (Round ratios to 2 decimal places, e.g. 78.74%) Cost-to-retail percentage (1) Excluding both markups and markdowns. % (2) Excluding markups but including markdowns. % (3) Excluding markdowns but including markups. % (4) Including both markdowns and markups. %
Which of the methods in (b) above does the following? (1) Provides the most conservative estimate of ending inventory. (2) Provides an approximation of lower-of-cost-or-market. (3) Is used in the conventional retail method. (Answers included in drop-down boxes: Excluding both markups and markdowns, excluding markdowns but including markups, excluding markups but including markdowns & including both markdowns and markups.)
Compute ending inventory at lower-of-cost-or-market. (Round ratio to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.) Ending inventory $
Compute cost of goods sold based on (d). (Round answer to 0 decimal places, e.g. 6,225.) Cost of goods sold $
Compute gross margin based on (d). (Round answer to 0 decimal places, e.g. 6,225.) Gross margin $
In: Accounting
Problem 5A-7 Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10]
Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company’s income statements for the three most recent months follow:
|
Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 |
|||||||||||
| July | August | September | |||||||||
| Sales in units | 6,000 | 6,500 | 7,000 | ||||||||
| Sales | $ | 570,000 | $ | 617,500 | $ | 665,000 | |||||
| Cost of goods sold | 342,000 | 370,500 | 399,000 | ||||||||
| Gross margin | 228,000 | 247,000 | 266,000 | ||||||||
| Selling and administrative expenses: | |||||||||||
| Advertising expense | 26,200 | 26,200 | 26,200 | ||||||||
| Shipping expense | 58,000 | 61,600 | 65,200 | ||||||||
| Salaries and commissions | 110,000 | 116,800 | 123,600 | ||||||||
| Insurance expense | 8,450 | 8,450 | 8,450 | ||||||||
| Depreciation expense | 17,900 | 17,900 | 17,900 | ||||||||
| Total selling and administrative expenses | 220,550 | 230,950 | 241,350 | ||||||||
| Net operating income | $ | 7,450 | $ | 16,050 | $ | 24,650 | |||||
Required:
1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed.
2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bX.
3. Redo the company’s income statement at the 7,000-unit level of activity using the contribution format.
In: Accounting
Problem 5A-7 Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10]
Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company’s income statements for the three most recent months follow:
|
Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 |
|||||||||||
| July | August | September | |||||||||
| Sales in units | 8,500 | 9,000 | 9,500 | ||||||||
| Sales | $ | 850,000 | $ | 900,000 | $ | 950,000 | |||||
| Cost of goods sold | 510,000 | 540,000 | 570,000 | ||||||||
| Gross margin | 340,000 | 360,000 | 380,000 | ||||||||
| Selling and administrative expenses: | |||||||||||
| Advertising expense | 37,000 | 37,000 | 37,000 | ||||||||
| Shipping expense | 110,000 | 115,600 | 121,200 | ||||||||
| Salaries and commissions | 155,000 | 162,800 | 170,600 | ||||||||
| Insurance expense | 10,500 | 10,500 | 10,500 | ||||||||
| Depreciation expense | 17,000 | 17,000 | 17,000 | ||||||||
| Total selling and administrative expenses | 329,500 | 342,900 | 356,300 | ||||||||
| Net operating income | $ | 10,500 | $ | 17,100 | $ | 23,700 | |||||
Required:
1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed.
2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bX.
3. Redo the company’s income statement at the 9,500-unit level of activity using the contribution format.
In: Accounting
The American Baker’s Association reports that annual sales of
bakery goods last year rose 15 percent, driven by a 50 percent
increase in the demand for bran muffins. Most of the increase was
attributed to a report that diets rich in bran help prevent certain
types of cancer. You are the manager of a bakery that produces and
packages gourmet bran muffins, and you currently sell bran muffins
in packages of three. However, as a result of this new report, a
typical consumer’s inverse demand for your bran muffins is now
P = 11 - 1.5Q.
If your cost of producing bran muffins is C(Q) =
3.5Q, determine the optimal number of bran muffins to sell
in a single package and the optimal package price.
Instruction: Enter your response for the optimal
package price rounded to two decimal places.
Optimal package size: units
Optimal package price: $
In: Economics
4. if temperatures fall, fewer persons will go on vacation is which type of relationship?
a. normative
b. positive
c. inverse
d. negative
6.the production possibilities curve shifts to the right
a. if prices of the 2 goods fall
b. if we get more money
c. if we get more resources
d. if we produce more of one good and less of the other good
8. if both the price and quantity of eggs rise, which is most likely to have happened?
a. demand for eggs shifts left
b. supply of eggs shift right
c. supply of eggs shifts left
d. demand for eggs shift right
9. if bread and butter are complements, if the price of butter rises
a. demand for butter shifts left
b. demand for bread shifts left
c. demand for bread shifts right
d. demand for butter shifts right
In: Economics
Assume that the United States has two sectors: the food sector has land as a specific factor and the manufacturing sector uses capital as a specific factor. Labour is mobile across sectors. Suppose that exceptionally good weather enables several states to enjoy ‘bumper’ crops that lead to an 8 percent decline in the price of food.
In: Economics
The American Baker’s Association reports that annual sales of bakery goods last year rose 15 percent, driven by a 50 percent increase in the demand for bran muffins. Most of the increase was attributed to a report that diets rich in bran help prevent certain types of cancer. You are the manager of a bakery that produces and packages gourmet bran muffins, and you currently sell bran muffins in packages of three. However, as a result of this new report, a typical consumer’s inverse demand for your bran muffins is now P = 12 - 1.5Q. If your cost of producing bran muffins is C(Q) = 1.5Q, determine the optimal number of bran muffins to sell in a single package and the optimal package price. Instruction: Enter your response for the optimal package price rounded to two decimal places.
Optimal package size: ___units
Optimal package price: $ ___
In: Economics
Aldi, a Germany-based global discount supermarket chain, opened two stores recently in New York City and it can offer prices that are 20% less than Walmart’s, which makes it an attractive place for city dwellers to shop. Aldi’s distinctive competence is produced by a number of factors. It operates with a business model that focuses on selling a limited number of groceries and household items in a small setting. Its typical stores are just 16% the size of a typical Wal-Mart store and carry just 1,500 or so items, compared to 100,000 items in a superstore. Most of its items are private brands, that is, goods that Aldi buys and packages itself. Which of the following concepts best describes the factors that contribute to Aldi’s distinctive competence?
| a. |
Situational analysis |
|
| b. |
Core capabilities |
|
| c. |
Strategic group |
|
| d. |
Strategic reference points |
In: Economics
1) A public good is described, in part, as a good
A) that has a marginal cost at or near zero.
B) that is essential to life.
C) which has all of these characteristics.
D) that may be depleted if demand is heavy.
2) The optimal output of a public good occurs where
A) the marginal benefit of the consumer who values the good most should equal the marginal cost of the good.
B) the sum of the marginal benefit of each consumer at a given output equals the marginal cost of the good.
C) the total cost of the good equals the cumulated benefits of all consumers.
D) the horizontal sum of the consumer benefits of the good should equal the marginal cost of producing the good.
3) Which is not a good method of providing public type goods by private means?
A) Private contracts
B) Clubs
C) Free markets with competing entrepreneurs
C) Funding by donation
Please answer all of the questions
In: Economics