¶ … Margin
Contribution Income Statement
Sales (9000 units sold)
2,700,000
Variable Expenses
Product costs (120+60=40)x9000
1,980,000
Selling and admin 10x9000
Contribution Margin (70 per unit)
Fixed Expenses
Manufacturing Overhead
Selling and administrative
Net Operating Income
The net income on the contribution income statement is $25,000 lower than the $305,000 on the absorption income statement because $25 in fixed expenses is assigned to each unit cost (Accounting for Management, 2012). Where 10,000 units were produced, but only 9,000 sold, that leaves 1,000 units in inventory. The additional $25,000, 25 x 1,000, is listed in the inventory account.
Contribution Margin Income Statement
Sales 9,000 units at 330
2,970,000
Variable Expenses
Production (120+60+40)x9,000
1,980,000
Selling and admin 10x9,000
90,000
2,070,000
Contribution Margin
9,000,000
Fixed Expenses
Manufacturing Overhead
250,000
Selling and admin
100,.000
350,000
Net Income
550,000
Break even Analysis
0+350,000/(900,000/9,000)
0+350,000/100=3500 units
(150+60+40)/9,000=2,340,000
2,970,000-2,340,000=70
0+350,000/70=5000 units
Part II
Manufacturing Decision
Selling Price
250 ea unit
210 ea unit
Sales 1100 units
275,000
231,000
Variable Expenses
Direct Material at 110 per unit
121,000
121,000
Direct Labor at 60 per unit
66,000
66,000
Variable Overhead at 40 per unit
44,000
231,000
44,000
231,000
Contribution Margin
44,000
0
With the selling price at 250 per unit, the contribution margin is 40 per unit (44,000/1100). If the selling price is 210 per unit, the contribution margin is zero. The decision needs to be declined because of ensuring that proper equipment is available, ensuring the needed skill of labor, allocated fixed overhead, after sales-service, and the risk involved of defective product (Brewer, 2010). Other variable costs, such as equipment maintenance, fluctuating material costs, as well as others, can change the contribution margin. With a narrow contribution margin, there is the risk of completing the order and just breaking even without benefit to the company, or even having a loss in the end. In manufacturing, there is also the consideration of environmental costs, such as pollution.
Bibliography
Accounting for Management. (2012). Retrieved from Income Comparison for variable and absorption costing: http://accounting4management.com/incom...mparison_of_variable_and_absorption_costing.htm
Brewer, P.C. (2010). Introduction to Managerial Accounting. New York, NY: McGraw Hill.
Financial Analysis Marco Polo Statement of Income Revenue Cost of Goods Sold Gross Profit Marketing Expenses Distribution Overheads Interest Exp Total Expenses Net Income The first year of trading was rough, in that the company lost money. While on the surface this poor performance, it should be noted that the cost of goods sold is somewhat inflated because the expenses of putting together each guide were not amortized. Thus, they are fully applied to this year, even though the sales of these
Income Statement Vertical2011 Vertical 2010 Horizontal Sales Other Revenue Total Less Cost of Goods Sold Operation & Admin Expenses Income Tax Interest Expense Total Net Income Because of economic decline and uncertainties of unemployment, energy prices, etc. 2010 was in over deflation and 2011 had an overall inflation (2011 Annual Report, 2011). Income tax increased in 2011 due to repatriation taxes on dividends from a Canadian subsidiary. Balance Sheet Vertical 2011 Vertical 2010 Horizontal Cash & equivalent Receivables Inventories Prepaid Expenses Total Property' Depreciation & Amortization -71.30% -68.20% Goodwill Invest. Unconsolidated affiliate Other Assets Total Assets Cur. Note Maturities Cur. Cap. Lease
An example here may be income from an original Rembrandt that one possesses and, occasionally, loans for parties, or income from one's continuing retail business, or income that is still coming in from last month's rental payment even though the original inhabitants have discontinued their lease. This part of the income statement remains unchanged. The only element that SFAS 130 appends is the category of other comprehensive income. 3. Definition
This is the result of the decline in inventory levels. If the inventory levels had not changed, there would have been no difference between the net profit for the two methods. If the company sold another 10,000 units, it would have a higher profit. This calculation was based on the contribution margin method. What occurs in this method is that the company sells more, but it does not produce more.
3% decline. The decrease in gross margin was primarily due to an increase in postage rates effective May 2007 and a reduction in the prices of Netflix's most popular subscription plans during the second quarter of 2007 caused by increased competition. The company is anticipating further pressures on gross margin in 2008 due to continued price competition and another slight increase in postage rates. The company is anticipating a shift from
Nikes Income Sheet The latest Nike 10-K covers the period ending 31st May 2016 (Nike, 2016). Looking specifically at the consolidated income statement, this is very short, and although there is a subcategory for gross profit. Nike, 2016). This is the two step format, as there is a breakdown of the categories, operating income is separated from non-operating income and there is a subcategory for gross profit, these indicate the
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now