ACCTG322 Chapter Notes - Chapter 88-1: Gross Margin, Earnings Before Interest And Taxes, Contribution Margin
Get access
Related Documents
Related Questions
Trez Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows.
Sales (80,000 units à $40 per unit) | $ | 3,200,000 | |||||
Cost of goods sold | |||||||
Beginning inventory | $ | 0 | |||||
Cost of goods manufactured (100,000 units à $20 per unit) | 2,000,000 | ||||||
Cost of good available for sale | 2,000,000 | ||||||
Ending inventory (20,000 Ã $20) | 400,000 | ||||||
Cost of goods sold | 1,600,000 | ||||||
Gross margin | 1,600,000 | ||||||
Selling and administrative expenses | 610,000 | ||||||
Net income | $ | 990,000 | |||||
Additional Information
Selling and administrative expenses consist of $450,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses.
The company's product cost of $20 per unit is computed as follows.
Direct materials | $ | 3 | per unit | ||
Direct labor | $ | 9 | per unit | ||
Variable overhead | $ | 2 | per unit | ||
Fixed overhead ($600,000 / 100,000 units) | $ | 6 | per unit | ||
Required:
1. Prepare an income statement for the company under variable costing.
|
The following data relate to the operations of Shilow Company, awholesale distributor of consumer goods:
Current assets as ofMarch 31: | ||
Cash | $ | 8,500 |
Accounts receivable | $ | 24,000 |
Inventory | $ | 45,600 |
Building and equipment, net | $ | 121,200 |
Accounts payable | $ | 27,300 |
Common stock | $ | 150,000 |
Retained earnings | $ | 22,000 |
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual) | $ | 60,000 |
April | $ | 76,000 |
May | $ | 81,000 |
June | $ | 106,000 |
July | $ | 57,000 |
Sales are 60% for cash and 40% on credit. Credit sales arecollected in the month following sale. The accounts receivable atMarch 31 are a result of March credit sales.
Each monthâs ending inventory should equal 80% of the followingmonthâs budgeted cost of goods sold.
One-half of a monthâs inventory purchases is paid for in themonth of purchase; the other half is paid for in the followingmonth. The accounts payable at March 31 are the result of Marchpurchases of inventory.
Monthly expenses are as follows: commissions, 12% of sales;rent, $3,300 per month; other expenses (excluding depreciation), 6%of sales. Assume that these expenses are paid monthly. Depreciationis $909 per month (includes depreciation on new assets).
Equipment costing $2,500 will be purchased for cash inApril.
Management would like to maintain a minimum cash balance of atleast $4,000 at the end of each month. The company has an agreementwith a local bank that allows the company to borrow in incrementsof $1,000 at the beginning of each month, up to a total loanbalance of $20,000. The interest rate on these loans is 1% permonth and for simplicity we will assume that interest is notcompounded. The company would, as far as it is able, repay the loanplus accumulated interest at the end of the quarter.
Required:
Using the preceding data:
1. Complete the following schedule:
2. Complete the following:
3. Complete the following cash budget:
4. Prepare an absorption costing income statement for thequarter ended June 30.
5. Prepare a balance sheet as of June 30.
Complete the following schedule:
|
Complete the following:
|
Complete the following cash budget: (Cash deficiency, repaymentsand interest should be indicated by a minus sign.)
|
Prepare an absorption costing income statement for the quarterended June 30.
|
Prepare a balance sheet as of June 30.
|
Please help on the following questions:) Thank you in advanced!
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: |
Current assets as of March 31: | ||
Cash | $ | 8,800 |
Accounts receivable | $ | 25,200 |
Inventory | $ | 47,400 |
Building and equipment, net | $ | 114,000 |
Accounts payable | $ | 28,425 |
Capital stock | $ | 150,000 |
Retained earnings | $ | 16,975 |
a. | The gross margin is 25% of sales. |
b. | Actual and budgeted sales data: |
March (actual) | $63,000 |
April | $79,000 |
May | $84,000 |
June | $109,000 |
July | $60,000 |
c. | Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. |
d. | Each monthâs ending inventory should equal 80% of the following monthâs budgeted cost of goods sold. |
e. | One-half of a monthâs inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory. |
f. | Monthly expenses are as follows: commissions, 12% of sales; rent, $3,600 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $855 per month (includes depreciation on new assets). |
g. | Equipment costing $2,800 will be purchased for cash in April. |
h. | Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. |
Required: | |||||||||||||||||||||||||||||
Using the data above: | |||||||||||||||||||||||||||||
1. | Complete the following schedule.
|
2.) Complete the following:
|
Budgeted cost of goods sold for April = $79,000 sales à 75% = $59,250. | |||||||||||||||||||||||||||||||||||
Add desired ending inventory for April = $63,000 Ã 80% = $50,400.
|
3.)
Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign.)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4.)
Prepare an absorption costing income statement for the quarter ended June 30.\
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5.)
Prepare a balance sheet as of June 30.
|