Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 1-14A

HOUSE OF ORGANS, INC.Traditional Income Statement

For the Month Ended November 30

Sales $ 150,000 Cost of goods sold 90,000 Gross margin 60,000 Selling and administrative expenses: Selling expenses: Advertising $ 950 Delivery of organs 3,600 Sales salaries & commissions 10,800 Utilities 650 Depreciation of sales facilities 5,000 Total selling expenses 21,000 Administrative expenses: Executive salaries 13,500 Depreciation of office equipment 900 Clerical 4,900 Insurance 700 Total administrative expenses 20,000 Total selling and administrative expenses 41,000 Net operating income $ 19,000

Correct!

HOUSE OF ORGANS, INC.Contribution Format Income Statement

For the Month Ended November 30

Total Per organSales $150,000 $2,500 Variable expenses: Cost of goods sold $ 90,000 $ 1,500 Delivery of organs 3,600 60 Sales commissions 6,000 100 Clerical 2,400 40 Total variable expenses 102,000 1,700 Contribution margin $ 48,000 $ 800

Correct! Correct!Fixed expenses: Advertising $ 950 Sales salaries 4,800 Utilities 650 Depreciation of sales facilities 5,000 Executive salaries 13,500 Depreciation of office equipment 900 Clerical 2,500 Insurance 700 Total fixed expenses 29,000 Net operating income $ 19,000

Correct!

Given Data P01-14A:

HOUSE OF ORGANS, INC.

Costs Cost FormulaSelling: Advertising $ 950 per month Delivery of organs $ 60 per organ sold Sales salaries and commissions $ 4,800 per month plus 4% of sales Utilities $ 650 per month Depreciation of sales facilities $ 5,000 per monthAdministrative: Executive salaries $ 13,500 per month Depreciation of office equipment $ 900 per month Clerical $ 2,500 per month plus $40 per organ sold Insurance $ 700 per month

Average sales price of organ $ 2,500 Average cost of organ $ 1,500 Organs sold & delivered in November 60

Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 1-18A

FRANKEL LTD.Analysis of Expenses

Cost of goods sold VariableShipping expense MixedAdvertising expense FixedSalaries and commissions MixedInsurance expense FixedDepreciation expense Fixed

Analysis of the mixed expenses:Shipping Salaries &

Units Expense Comm. Exp.High level of activity 4,500 £ 56,000 £ 143,000 Low level of activity 3,000 44,000 107,000 Change 1,500 £ 12,000 £ 36,000

Correct! Correct! Correct!

Variable cost element: Change Change Variablein Cost in Activity Rate

Shipping expense £ 12,000 1,500 £ 8 <--Correct!Salaries and commission expense £ 36,000 1,500 £ 24 <--Correct!

Fixed cost element: Shipping Salaries &Expense Comm. Exp.

Cost at high level of activity £ 56,000 £ 143,000 Less variable cost element 36,000 108,000

£ 20,000 £ 35,000 Correct! Correct!

The cost formulas are: Shipping expense Y=£20,000+£8X Salaries and commission expense Y=£35,000+£24X

FRANKEL LTD.Income Statement

For the Month Ended June 30

Sales in units 4,500 Sales revenue £ 630,000 Variable expenses: Cost of goods sold £ 252,000 Shipping expense 36,000 Salaries & comm. expense 108,000 396,000 Contribution margin 234,000 Fixed expenses: Shipping expense 20,000 Advertising expense 70,000 Salaries and commissions exp. 35,000 Insurance expense 9,000 Depreciation expense 42,000 176,000 Net operating income £ 58,000

Correct!

Given Data P01-18A:

FRANKEL LTD.Comparative Income Statements

For the Three Months Ended June 30

April May JuneSales in units 3,000 3,750 4,500 Sales revenue £ 420,000 £ 525,000 £ 630,000 Cost of goods sold 168,000 210,000 252,000 Gross margin 252,000 315,000 378,000 Selling and administrative expenses: Shipping expense 44,000 50,000 56,000 Advertising expense 70,000 70,000 70,000 Salaries and commissions 107,000 125,000 143,000 Insurance expense 9,000 9,000 9,000 Depreciation expense 42,000 42,000 42,000 Total selling and administrative expenses: 272,000 296,000 320,000 Net operating income (loss) -£ 20,000 £ 19,000 £ 58,000

Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 1-22A

ALDEN COMPANYExpenses

Units Sold ShippingQuarter (X) (000) (Y) Expense

Year 1-1st 16,000 $ 160,000 2nd 18,000 175,000 3rd 23,000 217,000 4th 19,000 180,000

Year 2-1st 17,000 170,000 2nd 20,000 185,000 3rd 25,000 232,000 4th 22,000 208,000

Totals 160,000 $ 1,527,000

Units ShippingSold Expense

High activity level 25,000 $ 232,000 Low activity level 16,000 160,000 Change 9,000 $ 72,000

Correct! Correct!

Variable cost per unit $ 8 Correct!

Fixed cost element:Total shipping expense at high activity level $ 232,000 <--Correct!Less variable element 200,000 <--Correct!Fixed cost element $ 32,000 <--Correct!

Cost formula: Y=$32,000+$8X

ALDEN COMPANYBudgeted Contribution Format Income Statement

For the First Quarter, Year 3

Sales $ 1,050,000 Variable expenses: Cost of goods sold $ 420,000 Shipping expense 168,000 Sales commission 52,500 Total variable expenses 640,500 Contribution margin 409,500 Fixed expenses: Shipping expense 32,000 Advertising expense 170,000 Administrative salaries 80,000 Depreciation expense 50,000 Total fixed expenses 332,000

Net operating income $ 77,500 Correct!

Given Data P01-22A:

ALDEN COMPANY

Cost formulas:

Cost Cost FormulaCost of goods sold $ 20 per unit soldAdvertising expense $ 170,000 per quarterSales commissions 5% of salesAdministrative salaries $ 80,000 per quarterShipping expense ?Depreciation expense $ 50,000 per quarter

Units sold and related shipping expenses:Shipping

Quarter Units Sold ExpenseYear 1: First 16,000 $ 160,000 Second 18,000 $ 175,000 Third 23,000 $ 217,000 Fourth 19,000 $ 180,000 Year 2: First 17,000 $ 170,000 Second 20,000 $ 185,000 Third 25,000 $ 232,000 Fourth 22,000 $ 208,000

Sales forecast for 1st Quarter, Year 3: Units 21,000 Price per unit $ 50