1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
frez [133]
3 years ago
10

Juicy Beauty manufactures and sells a face cream to small specialty stores in the greater Los Angeles area. It presents the mont

hly operating income statement shown here to George Lopez, a potential investor in the business. Help Mr. Lopez understand Juicy Beauty's cost structure.
Juicy Beauty Operating Income Statement, June 2017
Units sold 20,000
Revenues $200,000
Cost of goods sold:
Variable manufacturing costs $110,000
Fixed manufacturing costs 40,000
Total 150,000
Gross margin 50,000
Operating costs:
Variable marketing costs $10,000
Fixed marketing and administrative costs 20,000
Total operating costs 30,000
Operating income $20,000
1. Recast the income statement to emphasize contribution margin.
2. Calculate the contribution margin percentage and breakeven point in units and revenues for June 2017.
3. What is the margin of safety (in units) for June 2017?
4. If sales in June were only 16,000 units and Juicy's tax rate is 30%, calculate its net income.
Business
2 answers:
Lilit [14]3 years ago
5 0

Answer:

Juicy Beauty and George Lopez

Juicy Beauty's Cost Structure:

1. Juicy Beauty's Contribution Income Statement, June 2017

Units sold 20,000

Revenues                                                       $200,000

Variable Cost:

Variable manufacturing costs      $110,000

Variable marketing costs              $10,000

Total Variable Cost                                          120,000

Contribution                                                    $80,000

Fixed costs:

Fixed manufacturing costs             40,000

Fixed marketing & admin costs     20,000

Total Fixed costs                                              60,000

Operating income                                         $20,000

2a) Contribution Margin Percentage = $80,000/$200,000 x 100 = 40%

2b) Breakeven point in units and revenue:

To breakeven, total costs = total revenue

Breakeven point in units = Fixed Cost/Contribution per unit = $60,000/$4 = 15,000 units

Breakeven point in revenue = Fixed Cost/Contribution margin ratio = $60,000/40% = $150,000

3. Margin of Safety = (Sales - Break-even revenue)/Sales x 100 = ($200,000 - $150,000)/$200,000 x 100 = $50,000/$200,000 x 100 = 25%

4. Calculation of Net Income with sales of 16,000 units and Tax of 30%:

Sales                $160,000

Variable cost      96,000

Contribution    $64,000

Fixed Cost         60,000

Pretax Income   $4,000

Tax                       1,200

Net Income      $2,800

Explanation:

a) Juicy Beauty Operating Income Statement, June 2017

Units sold 20,000

Revenues                                                       $200,000

Cost of goods sold:

Variable manufacturing costs      $110,000

Fixed manufacturing costs             40,000

Total                                                                  150,000

Gross margin                                                   $50,000

Operating costs:

Variable marketing costs              $10,000

Fixed marketing & admin costs     20,000

Total operating costs                                       30,000

Operating income                                         $20,000

b) Financial accounting prepares the income statement differently from the way that cost and management accounting prepare the income statement.  Financial accounting emphasizes gross profit - using absorption costing technique.  Management accounting focuses on contribution using variable costing.  In variable costing, costs are identified according to their behaviors.

c) The breakeven point is the level of production at which the costs of production equal the revenues for a product.  This means that there is no profit.

d) The contribution margin ratio is the ratio of contribution margin to the sales.  It is expressed in percentage.

e) The margin of safety is the ratio of the difference between sales revenue and breakeven revenue over the sales revenue.  It is expressed in percentage.

KatRina [158]3 years ago
3 0

Answer: Please see explanation column for answer

Explanation:

Recasting  the income statement to emphasize contribution margin.

Juicy Beauty Operating Income Statement, June 2017

Units sold                                                            20,000

Revenues                                                         $200,000

Variable costs(subtract):

Variable manufacturing costs    $110,000

Variable marketing costs             $10,000

Total variable costs                                                 $120,000  

Contribution margin                                                   $80,000

Fixed costs

fixed manufacturing costs                         40,000

Fixed marketing and administrative costs 20,000

Total fixed cost                                                                $60,000

Operating income                                                           $20,000

Working  for income statement above =

Contribution margin = Revenue -Total  variable cost =$200,000- ($110,000 + $10,000) - $80,000

Operating income= Contribution margin - Total fixed cost = $80,000 - $($40,000 +$20,000) -=$20,000

2  The contribution margin percentage and breakeven point in units and revenues for June 2017.

Contribution margin percentage = ,Contribution margin/ Revenue x 100%

= $80,000/ $200,000 x 100= 40 %

Contribution margin per unit = ,Contribution margin/ units sold

                                                   80,000 / 20,000= $4 per unit

Break  even point units  = Total fixed cost/ ,Contribution margin per unit

 = $60,000/ $4=  15,000units

Break even revenue=

we first calculate the selling price = Revenue / units sold = $200,000/ 20,000 =$10

Break even revenue=Break even units x per unit sold = $15,000 x $10 = $150,000.

3. Margin of safety = units sold - break even point unit

20,000 - 15,000 =5000 units

4. If the sales is 16,000 and tax is 30% , Net income is

Units sold                     16,000

Revenue                     $160,000

Contribution margin    $64,000

Total fixed cost           - $60,000

Operation income       $4,000

tax at 30 %                  - $ 1200

Net income                 $2,800

working

Revenue = units sold x sale per unit = 16,000 x $10 = $160,000

Contribution margin = Revenue x contribution margin percentage = $160,000 x 40% = $64,000

Operation income = contribution margin - fixed costs= $64,000 - $60,000 = $4000

Tax = 30% of 4000 = $1200

Net income = $4000 - $1200 = $2,800

You might be interested in
A basic finding of labor economics is that workers who have more experience in the labor force are paid more than workers who ha
weqwewe [10]

Answer:

1. A basic finding of labor economics is that workers who have more experience in the labor force are paid more than workers who have less experience (holding constant the amount of formal education). True

2. This might be the case because people with more experience have usually had more on-the-job training. True

3. Some studies have also found that experience at the same job (called job tenure) has an extra positive influence on wages. Job tenure is valuable because people gain <u>job-specific knowledge</u> that is useful to the firm.

Explanation:

A worker with more experience means more on-the-job training, this drastically increases the worker's value of the marginal product of labor.

5 0
2 years ago
A gold ring selling for $1845 is reduced by 30% after Valentine's Day. Find the reduced price of the ring. To find a price after
Anit [1.1K]

Answer:

1291.50

Explanation:

8 0
3 years ago
Read 2 more answers
After reviewing the reports of long-term changes in the macroenvironment, you must pick one element that you think Gerlach shoul
Elina [12.6K]

Answer:

Demographic Environment

Explanation:

When looking at the macroenvironmet and the likely changes happening in there, one seems to look at the broader condition of the economy which can be impacted by the monetary and fiscal policies, as well as employment and inflation rates.

The demographic environment is part of the six forces of the microenvironment and should be considered first amongst the three items listed. With this, a company can be able to identify the exact target markets needed for their respective products or services .

7 0
3 years ago
Judy's Boutique just paid an annual dividend of $3.73 on its common stock. The firm increases its dividend by 3.40 percent annua
Talja [164]

Answer:

cost of equity = 12.16 %

Explanation:

given data

annual dividend of $3.73

increases dividend = 3.40 percent annually

stock price = $43.96 per share

to find out

What is the company's cost of equity

solution

we will use here Gordon model for compute company's cost of equity that is

market value = \frac{dividend* ( 1+growth\ rate)}{cost\ of\ equity - Growth\ rate}         ........................1

put here value we get

43.96 = \frac{3.73* ( 1+0.034)}{cost\ of\ equity - 0.034}

solve it we get

cost of equity =  0.121735

cost of equity = 12.16 %

8 0
3 years ago
Every year managers are given targets for categorizing their employees’ performance at the end of the year. The managers are all
Alla [95]

Answer:

forced distribution

Explanation:

Forced distribution method is the oldest method used in various industries to evaluate the performance of any class of employees based on some standard norms as set by the company under this method.

It basically distributes each class of employee into category of management, lower, middle or upper.

This is forced because there is no change in such evaluation method, despite even the change in the company's working style is there.

But in the given instance the company has followed this forced distribution.

8 0
2 years ago
Other questions:
  • The promise of a reward motivates me to accept additional task
    10·1 answer
  • are four fundamental resources—natural resources, capital, human resources, and entrepreneurship—that both businesses and nonpro
    7·1 answer
  • A customer tells you that they “must have” a particular item that you are out of in your store. You can tell that the customer i
    5·1 answer
  • The Government and Public Administration Career Cluster includes careers involving which of the following? Travel and tourism Co
    9·1 answer
  • LeVon Fashions specializes in imported clothing. During March, LeVon completed a series of transactions. For each of the followi
    8·1 answer
  • Prospective utilization review is:
    6·1 answer
  • To ensure that employees are learning the content effectively during the training program, firms should (choose all that apply):
    7·1 answer
  • The economy's long-run AS curve assumes that wages and other resource prices _____. rev: 06_12_2018 Multiple Choice eventually r
    10·1 answer
  • Define capital economics.​
    7·2 answers
  • when conducting a multi-criteria analysis, how would you determine the best option upon concluding the analysis?
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!