Chester's product manager is considering lowering the price of the Cone product by $2.50 and wants to know what the impact will
1 answer:
Answer:
The contribution margin will decrease by 2.50
Explanation:
IF sales decreases, then the contribution margin decreases.
That's because, there is less money to pay for the variable cost.
The company will also have to sale more units to break even, as now each units contribution is fewer.
Cone's should evaluate how much their sales are expected to increase for the lower price and be cautious
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Answer:
Explanation:
1. Number of goods available for sale = Beginning Inventory + Purchase, March 5 + Purchase, September 19 = 4,000+10,000+6,000 = 20,000 units
Cost of goods available for sale = Beginning Cost of inventory + Cost of Purchase, March 5 + Cost of Purchase, September 19 = 4,000×24 + 10,000×25 + 6,000×27 = 96,000+250,000+162,000 = $508,000
2. Number of units in ending inventory = Number of units available for sale - Number of units sold = 20,000-4,200-9,000 = 6,800 units
3. Calculations are attached
4.
Income statement FIFO:
Sales $937,800 (4,200×69 + 9,000×72)
Less: Cost of Goods Sold ($326,000)
Gross profit $611,800
Less Operating expense $602,000
Net income $9,800
Income statement LIFO:
Sales $937,800 (4,200×69 + 9,000×72)
Less: Cost of Goods Sold ($342,000)
Gross profit $595,800
Less Operating expense $602,000
Net loss $($6,200)
Income statement LIFO:
Sales $937,800 (4,200×69 + 9,000×72)
Less: Cost of Goods Sold ($334,092)
Gross profit $603,708
Less Operating expense $602,000
Net income $1,708
**Cost of goods sold:-
Under FIFO = 96,000+5,000+225,000 = $326,000
Under LIFO = 105,000+162,000+75,000 = $342,000
Under weighted average method = 103,782+230,310 = $334,092
6. LIFO method minimize taxes
