Accounting: Net Operating Income Essay

Submitted By crystal127
Words: 582
Pages: 3
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Pr. 5-22 1. Contribution Income Statement ------------------------------------------------- Sinks Mirrors Vanities Total
Percentage of total sales 32% 40% 28% 100%
Sales $160,000 100% $200,000 100% $140,000 100% $500,000 100%
Variable expenses 48,000 30% 160,000 80% 77,000 55% 285,000 57%
Contribution margin $ 112,000 70% $ 40,000 20% $ 63,000 45% $ 215,000 43%
Fixed expenses 223,600
Net operating income ($ 8,600)

2. Profits= Rev*CMR – FC 0= Rev*43% - 223,600 Rev = $520,000 3. Compared with the original, the VC of the total increase.
BE=223600/0.43=520,000, due to the different MCR, the BE is different

Pr. 5-26 1. Contribution Statement Income I Amount Per Unit Percent
Sales $ 800,000 $ 20 100%
Variable expenses 560,000 14 70%
Contribution margin 240,000 6 30%
Fixed expenses 192,000 4.8
Net operating income $ 48,000 $ 1.2 6%

Contribution Statement Income II Amount Per Unit Percent
Sales $ 800,000 $ 20 100%
Variable expenses 320,000 8 40%
Contribution margin 480,000 12 60%
Fixed expenses 624,000 15.6
Net operating income ($ 144,000) ($ 3.6) (18%)

2. (a) OLF1 = 240,000/48,000 = 5 OLF2 = 480,000/(-144,000) = -3.33
(b) Profits = CMR*Rev – FC 0 = Rev1 *30% - 192,000 Rev1 = $ 640,000 0= Rev2 *60% - 624,000 Rev2 = $ 1,040,000 (c) MS1 = $800,000 - $640,000 = $160,000 $160,000/$800,000 = 20% MS2 = $800,000 - $1,040,000 = ($240,000) ($240,000)/$800,000 = (30%) 3. As a manager, I will think how many product our company can produce. If the amount is greater and have a increasingly growth, then I would like to use the new method, otherwise, use the old method. 4. Contribution Income Statement Sales $1,200,000 ($800,000*1.5) Variable expenses 900,000 (1,200,000 – 300,000) Contribution margin 300,000 (240, 000+ 60,000) Fixed expenses 240,000 Net operating income $ 60,000 CMR = CM/Rev = $300,000/$1,200,000 = 25% Profits = Rev*CMR – FC 0= Rev*0.25 – $240,000 Rev = $960,000 I
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