PROBLEM 2–19 Contribution Format versus Traditional Income Statement [LO 2–6]
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $2,450 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $3,125 each. The selling and administrative costs that the company incurs in a typical month are presented below:
Costs Cost Formula
Advertising …………………… $700□per□month
Sales salaries and □commissions …… $950□per□month,□plus□8%□of sales
Delivery□ of pianos sold □customers ……$30 per piano sold
Utilities. $350 per month
Depreciation□ of sales facilities. $800 per month
Executive salaries $2,500 per month
Insurance $400 per month
Clerical $1,000 per month, plus□$20 per piano sold
Depreciation of □office equipment $300 per month
During August, Marwick’s Pianos, Inc., sold and delivered 40 pianos
: 1. Prepare an income statement for Marwick’s Pianos, Inc., for August. Use the traditional format, with costs organized by function.
- Redo requirement 1 above, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin.
- Refer to the income statement you prepared in requirement 2 above. Why might it be misleading to show the fixed costs on a per unit basis?
High-Low Method; Predicting Cost [LO 2–4, LO 2–5]Nova Company’s total overhead cost at various levels of activity are presented below:
Month Machine-Hours Total Overhead Cost
April. 70,000 $198,000
May 60,000 $174,000
June 80,000 $222,000
July 90,000 $246,000
Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000 machine-hour level of activity is:
Supervisory salaries□ (fixed). 21,000
Total □overhead cost $174,000
Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.
- Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!)
- Using the high-low method, estimate a cost formula for maintenance.
- Express the company’s total overhead cost in the linear equation form Y = a + bX.
- What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours?
Changes in Fixed and Variable Expenses; Break-Even and Target Profit Analysis [LO3–4, LO3–5, LO3–6]
Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3 per unit. Enough capacity exists in the company’s plant to produce 16,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.25, and fixed expenses associated with the toy would total $35,000 per month. The company’s Marketing Department predicts that demand for the new toy will exceed the 16,000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $1,000 per month. Variable expenses in the rented facility would total $1.40 per unit, due to somewhat less efficient operations than in the main plant.
- Compute the monthly break-even point for the new toy in unit sales and in dollar sales. 2. How many units must be sold each month to make a monthly profit of $12,000? 3. If the sales manager receives a bonus of 10 cents for each unit sold in excess of the break-even point, how many units must be sold each month to earn a return of 25% on the monthly investment in fixed expenses?
The aim of the research was to collect information from a female-only source to consider how women socially construct a powerful identity. The sample chosen featured women from different backgrounds, who are considered to be successful in their personal and professional lives. In this sense, the information was gathered to gain insight into how powerful language is structured and the development of a powerful identity for women in particular. Data Reduction and Coding After the data collection, a thematic analysis was utilized to determine commonly occurring patterns exhibited throughout the collected interviews. While the interviews were significantly reduced from the precise responses provided to suit the blog format, the responses incorporated the chosen language from the interviewees for each entry and question. In analyzing the data, an open coding process was followed to gain insight into the type of language used by each interviewee as well as to examine and establish themes and patters revealed throughout the collected data. Researcher’s Role and Ethical Considerations The role of the researcher was strictly observational and analytical and relied on information provided by the writer. As the interviews were presented previously on the blog, Babes Who Hustle (http://babeswhohustle.com), the study did not require access to the participants and therefore, incorporated an exclusively analytic approach to gathering and coding data. Due to the public nature of the interviews, the participants’ true names were included in the data and referred to as such throughout the data analysis. Data Analysis Each blog entry highlights the successes, both personally and professionally, of various women from a multitude of career fields. Sixty-four interviews were collected, each of which included four sections: how the writer met the interviewee, The Basics, The Interests, and The Hustle. The Basics included background information, such as hometown, current city, degree and school, as well as what is labeled as “Hustle,” and refers to the main topic of what they will discuss. The Interests included a woman they admire, how the spend their free time, and a few individually chosen questions of their favorite things. The Hustle is the main section of the blog and incorporates the previously emailed question responses of each woman and their success stories. The tone of the blog is conversational and includes precise responses from the participants. Multiple patterns were exposed throughout the data including language that referenced positive self talk, fear, confidence, speaking up about one’s thoughts and beliefs, surrounding yourself with strong people, specifically women, as well as the use of incorporating the pronoun we when discussing what their daily work day consists of. These patterns were seen over multiple responses and can be attributed to assisting with a ‘powerful’ identity perspective. Additionally, the majority of advice given by each woman was aimed at improving personality imperfections or i>GET ANSWER