Asked by Jonathan Conkle on Jun 10, 2024
Verified
Gordon Manufacturing earned net income of $100000 during 2015. The company wants to earn net income of $40000 more during 2016. The company's fixed costs are expected to be $147000 and variable costs are expected to be 30% of sales.
Instructions
(a) Determine the required sales to meet the target net income during 2016.
(b) Fill in the dollar amounts for the summary income statement for 2016 below based on your answer to part (a). Sales revenue \quad \quad \quad \quad $
Variable costs
Contribution margin
Fixed costs
Net income \quad \quad \quad \quad \quad $
Variable Costs
Expenses that vary in relation to the amount of products or services a company generates.
Fixed Costs
Expenses that do not change with the level of goods or services produced by a business over a certain period.
Net Income
The total earnings of a company after all expenses and taxes have been subtracted from total revenue.
- Grasp the fundamentals of conducting a Cost-Volume-Profit (CVP) analysis.
- Calculate break-even points in units and dollars using various input variables.
- Identify strategies for achieving targeted profit levels through manipulation of sales, costs, and pricing.
Verified Answer
LH
Louie HelsenJun 17, 2024
Final Answer :
(a) 70%×−$147,000=$140,00070 \% \times - \$ 147,000 = \$ 140,00070%×−$147,000=$140,000
Required sales =$410,000($287,000÷.70)= \$ 410,000 ( \$ 287,000 \div .70 )=$410,000($287,000÷.70)
(b)
Sales revenue $410,000 Variable costs ($410,000×30)123,000 Contribution margin 287,000 Fixed costs 147,000‾ Net income $140,000\begin{array}{lr}\text { Sales revenue } & \$ 410,000 \\\text { Variable costs }(\$ 410,000 \times 30) & 123,000 \\\text { Contribution margin } & 287,000 \\\text { Fixed costs } & \underline{147,000} \\\text { Net income } & \$ 140,000\end{array} Sales revenue Variable costs ($410,000×30) Contribution margin Fixed costs Net income $410,000123,000287,000147,000$140,000
Required sales =$410,000($287,000÷.70)= \$ 410,000 ( \$ 287,000 \div .70 )=$410,000($287,000÷.70)
(b)
Sales revenue $410,000 Variable costs ($410,000×30)123,000 Contribution margin 287,000 Fixed costs 147,000‾ Net income $140,000\begin{array}{lr}\text { Sales revenue } & \$ 410,000 \\\text { Variable costs }(\$ 410,000 \times 30) & 123,000 \\\text { Contribution margin } & 287,000 \\\text { Fixed costs } & \underline{147,000} \\\text { Net income } & \$ 140,000\end{array} Sales revenue Variable costs ($410,000×30) Contribution margin Fixed costs Net income $410,000123,000287,000147,000$140,000
Learning Objectives
- Grasp the fundamentals of conducting a Cost-Volume-Profit (CVP) analysis.
- Calculate break-even points in units and dollars using various input variables.
- Identify strategies for achieving targeted profit levels through manipulation of sales, costs, and pricing.