Mighty Bright Window Cleaners” monthly income statement at several levels of activity is as follows: Windows washed 2,000 4,000 6,000 Sales $3,000 $6,000 $9,000 Cost of goods sold 1,200 2,400 3,600 Gross profit 1,800 3,600 5,400 Operating expenses Advertising 400 400 400 Salaries and wages 700 900 1,100 Insurance 200 200 200 Postage 400 800 1,200 Total operating expenses 1,700 2,300 2,900 Operating income $ […]

Indicate whether each of the following is true (T) or false (F) in the space provided. 1.  Accounting contributes to management’s decision making process through internal reports that review the actual impact of the decision. 2.  In making business decisions, management ordinarily considers both financial and nonfinancial information. 3.  The process used to identify the financial data that change under alternative courses of action is […]

J Bryant, Ltd., is a local coat retailer. The store”s accountant prepared the following income statement for the month ended January 31. Sales 8750,000 Cost of goods sold 300,000 Gross margin 450,000 Less operating expenses Selling $23,560 Administrative 49,500 73,060 Net operating income $376,940 Bryant sells its coats for $250 each. Selling expenses consist of fixed costs plus a commission of $6.50 per coat. Administrative […]

McAlister Corporation incurs the following annual costs in producing 30,000 floppy drives for computers: Direct materials $ 60,000 Direct labor 100,000 Variable manufacturing overhead 80,000 Fixed manufacturing overhead 90,000 Total manufacturing costs. $330,000 However, if McAlister purchases the floppy drives from another company at a price of $10, what is the increase (decrease) in net income for McAlister? ($90,000) ($60,000) $30,000 $60,000

Henley Horticulture provides and maintains live plants in office buildings. The company”s 850 customers are charged $30 per month for this service, which includes weekly watering visits. The variable cost to service a customer”s location is $17 per month. The company incurs $2,000 each month to maintain its fleet of four service vans and $3,000 each month in salaries. Henley pays a bookkeeping service $2 […]

Calvin Company manufactures its own subassembly units known by the code name “ekrob.” Calvin incurs the following annual costs in producing 40,000 ekrobs: Direct materials $ 60,000 Direct labor 90,000 Variable overhead 50:000 Fixed overhead 80:000 Total $280,000 Calvin can purchase the ekrobs from Hobbes Corporation for $6.00 per unit. If they purchase the ekrobs, only $30,000 of the fixed overhead will be eliminated. However, […]

Helios Botanicals develops hybrid tea roses. A relative newcomer to the field, Helios is looking for innovative ways to advertise its products to potential customers. Rose Mayfield, sales manager and avid online shopper, wonders about advertising the company”s roses on various gardening websites. She has contacted Kim land Media, Inc., an advertising firm specializing in Internet advertising campaigns, to explore some options. After meeting with […]

Jenny Durdil Company is considering an investment of $200,000 in new equipment which will be depreciated on a straight-line basis (8-year life, no salvage value). The expected annual revenues and costs of the new product that will be produced from the equipment are: Sales $292,000 Less costs and expenses: Manufacturing costs S200,000 Equipment depreciation 25,000 Selling and administrative 43,900 268,900 Income before income taxes 23,100 […]

Use this income statement to answer the questions that follow. Sales ($50 per unit) $5,000 Less: Cost of goods sold ($32 per unit) 3,200 Gross margin 1,800 Less operating expenses: Salaries $800 Advertising 400 Shipping ($2 per unit) 200 1,400 Operating Income $ 400 Required What is the variable cost per unit? What is the total fixed expense? What is the contribution margin per unit? […]

Ellis McCormick and Elaine Sury are owners of MeetingKeeper, a company that sells personalized daily planners. Last month, the company sold 1,500 planners at a price of $6 per planner. Variable costs were $2.40 per unit; fixed expenses were $3,600. This month, Ellis and Elaine have decided to spend $2,000 to advertise in the local newspaper. They believe that the additional advertising will generate 25% […]