Goshen Company's contribution format income statement for the most recent month is given below: Sales (42,000 units) $ 1,218,000
Variable expenses 852,600 Contribution margin 365,400 Fixed expenses 292,320 Net operating income $ 73,080 The industry in which Goshen Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.Required:New equipment has come on the market that would allow Goshen Company to automate a portion of its operations. Variable expenses would be reduced by $8.70 per unit. However, fixed expenses would increase to a total of $657,720 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. (Input all amounts as positive values except losses which should be indicated by minus sign.)
If the economy's real GDP doubles in 9 years, we can conclude that its average annual rate of growth is 8%.
<h3>How can we determine average annual rate of growth?</h3>
The rule of 72 can be used to determine when the real GDP of an economy would double. In order to determine the doubling time, divide 72 by average annual rate of growth.
average annual rate of growth = 72 / average annual rate of growth
The government here is certain that it can achieve the same quantity and price regardless of if it uses a pollution tax or pollution allowance. This means that it would be charging the companies the same regardless of the method used.
Both methods would therefore yield the same amount if the government uses either of them.
