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Gnesinka [82]
3 years ago
5

The following income statement was drawn from the records of Joel Company, a merchandising firm: JOEL COMPANY Income Statement F

or the Year Ended December 31, 2018 Sales revenue (2,000 units × $125) $ 250,000 Cost of goods sold (2,000 units × $65) (130,000 ) Gross margin 120,000 Sales commissions (10% of sales) (25,000 ) Administrative salaries expense (30,000 ) Advertising expense (20,000 ) Depreciation expense (24,000 ) Shipping and handling expenses (2,000 units × $1.00) (2,000 ) Net income $ 19,000 Required Reconstruct the income statement using the contribution margin format. Calculate the magnitude of operating leverage. Use the measure of operating leverage to determine the amount of net income Joel will earn if sales increase by 10 percent.
Business
1 answer:
Ede4ka [16]3 years ago
5 0

Answer:

(I)

\left[\begin{array}{cc}Sales&250,000\\Variable \: Cost&-157,000\\Contribution \: Margin&93,000\\Admin \: expense&-30,000\\adv \: expense&-20,000\\depreciation \: expense&-24,000\\Net \: Income&19,000\\\end{array}\right]

(II)

Net income will be of 28,300 if sales increase by 10%

Explanation:

(I)

Variable cost:

65 unit cost

+12.5 sales commision (125 x 10%)

+1 shipping and handling epxneses

78.5 total variable cost

78.5 x 2000 = 157,000 variable cost

(II)

\frac{ContributionMargin}{Profit} = $Operating Leverage\\

Sales \: Revenue - Variable \: Cost = Contribution \: Margin

250,000 - 157,000 = 93,000

93,000/19,000 = 4.894736842 = 4.895

10% increase in revenue will ncrease the net income by 148.95%

19,000 x 148.95% = 28300.05

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Depreciation by Two Methods
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The amount of annual depreciation by the straight-line method is $18,800.

<h3>Annual depreciation</h3>

a.  Annual depreciation

Annual depreciation=[($80,000 - $4,800) ÷ 4]

Annual depreciation=$18,800

b. Annual depreciation

Year 1 Annual depreciation= 10% × $80,000

Year 1 Annual depreciation = $8,000

Year 2 Annual depreciation= 10% × ($75,000 - $7,500)

Year 2 Annual depreciation = $7,520

Therefore the amount of annual depreciation by the straight-line method is $18,800.

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3 0
1 year ago
A man earns Rs.450 in a month and spends 85% of his income.what does he save?
Advocard [28]
He saves Rs. 67.5 (take 450 times .85- since its a % and then subtract that from 450)
8 0
3 years ago
Does anyone have a perfect competition business example?
Nastasia [14]

Answer:

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Explanation:

3 0
3 years ago
The Chinese government chooses to control the value of its currency so that it is consistently worth some fixed amount of U.S. d
Vadim26 [7]

Answer: pegged exchange rate

Explanation:

A pegged exchange rate also referred to as the fixed exchange rate, sometimes is an exchange rate regime type whereby the value of a currency is fixed by the monetary authority of a particular country against the value of the currency of another country.

This is the type of exchange rate used by the Chinese government in the question above.

8 0
3 years ago
For each of the below, indicate where each item should be presented in the statement of cash flows (using the indirect method) u
Nataly_w [17]

Answer:

                                                                                       <u> Blank 1 </u>    <u>  Blank 2</u>

i. Depreciation expense                                                       A               I

ii. Purchase of office equipment                                          B               D

iii. Decrease in accounts receivable                                    A                I

iv. Payment of cash dividends                                              C               D

v. Conversion of bonds into common stock                        D               N

vi. Sold land and warehouse used in the corp.                    B                I

vii. Gain on sale of land and warehouse in part vi.              A               D

viii. Issued common stock for cash                                       C               I

ix. Decrease in accounts payable                                         A               D

x. Increase in inventory                                                          A               D

Explanation:

Note: This question is not complete. The complete question is therefore provided before answering the question. See the attached pdf for the complete question.

How each of the item will appear in the  the statement of cash flows (using the indirect method) is also provided below:

XYZ Company

Statement of Cash Flows (Indirect Method Format)

For the year...

<u>Details                                                                                   $                 $   </u>

Operating activities:

Net profit                                                                             xxx

Adjustment to reconcile net income:

i. Depreciation expense                                                     xx

iii. Decrease in accounts receivable                                  xx

vii. Gain on sale of land and warehouse in part vi.          (xx)

ix. Decrease in accounts payable                                      (xx)

x. Increase in inventory                                                   <u>    (xx)     </u>

Net cash flows from operating activities                                             xxx

<u>Investing activities:</u>

ii. Purchase of office equipment                                          (xx)

vi. Sold land and warehouse used in the corporation       <u>  xx   </u>

Net cash flows from investing activities                                               xxx

<u>Financing activities:</u>

iv. Payment of cash dividends                                              (xx)

viii. Issued common stock for cash                                     <u>   xx   </u>

Net cash flows from investing activities                                              <u>   xxx  </u>

Net cash flow for the year                                                                       xxx

Beginning cash balance                                                                         <u>  xxx  </u>

Ending cash balance                                                                              <u>  xxx  </u>

Note: The does not affect the cash flows statement:

v. Conversion of bonds into common stock

Download pdf
8 0
3 years ago
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