Question

Jasper Company provided the following information for last year:

Answer 1

Answer:                        

Explanation:

1.                                     Jasper Company

                                      Income Statement

                                                                                         

            Sales (280000 x $12)                                  $3360000

            Less: Cost of goods sold

            Add: Direct Material                   $180000

            Add: Direct Labor                       $505000

            Add: Manufacturing Overhead  $110000

            Cost of goods sold                                      ($795000)

            Gross Profit                                                  $ 2565000

           Less: Expenses

           Selling expense                           $437000

           Administrative expense              $854000

          Total expenses                                               ($1291000)

          Net income                                                     $1274000

Percentage of sales for each line item

Sales = 100%

Cost of goods sold: $\frac{795000}{3360000}$ x 100= 23.7%

Selling expense : $\frac{437000}{3360000}$ x 100 = 13%

Administrative expense: $\frac{854000}{3360000}$ x 100 = 25.4 %

2. According to the income statement in requirement 1, the manager can control cost by outsourcing the product if it is cheaper to get it from a third party in order to cut/control cost of goods sold.

Manager can also try controlling the administrative expenses as they are taking a bigger proportion than any other cost/ expense.