Posted: April 11th, 2016

# Calculate the firm’s operating income ?

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30
Sep
Precision Numbers
Categories: Business
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Precision Numbers, Inc., manufactures pocket calculators. Costs incurred in making 25,000 calculators in April included \$85,000 of fixed manufacturing overhead. The total absorption cost per calculator was \$12.50.

Required:
(a) Calculate the variable cost per calculator. (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the “\$” sign in your response.)

Variable cost per calculator \$

(b) The ending inventory of pocket calculators was 1,850 units higher at the end of the month than at the beginning of the month. By how much and in what direction (higher or lower) would operating income for the month of April be different under variable costing than under absorption costing? (Do not round your intermediate calculations. Omit the “\$” sign in your response.)

Operating income under variable costing will be \$, than under absorption costing.

(c) Express the pocket calculator cost in a cost formula. (Do not round your intermediate calculations. Round your answers to 2 decimal places. Omit the “\$” sign in your response.)
Total cost = \$ + (\$ / calculator x number of calculators)
30
Sep
Average cost per unit
Categories: Business
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Gravois, Inc., incurred the following costs during June:

Selling expenses \$ 158,375
Direct labor 283,140
Interest expense 41,065
Manufacturing overhead, actual 204,750
Raw materials used 460,980
Administrative expenses 123,000
________________________________________

During the month, 19,500 units of product were manufactured and 11,000 units of product were sold. On June 1, Gravois, Inc., carried no inventories. On June 30, there were no inventories for raw materials or work in process.

Requirement 1:
Calculate the cost of goods manufactured during June and the average cost per unit of product manufactured. (Round your answers to 2 decimal places. Omit the “\$” sign in your response.)

Cost of goods manufactured \$
Average cost per unit \$

Requirement 2:
Calculate the cost of goods sold during June. (Round your intermediate calculations to 2 decimal places. Omit the “\$” sign in your response.)

Cost of goods sold \$

Requirement 3:
(a) Calculate the difference between cost of goods manufactured and cost of goods sold. (Round your intermediate calculations to 2 decimal places. Input the amount as positive value. Omit the “\$” sign in your response.)
Difference \$

(b) How will this amount be reported in the financial statements?

The difference between cost of goods manufactured and cost of goods sold is in the account on the balance sheet.

Requirement 4:
Prepare a traditional (absorption) income statement for Gravois, Inc., for the month of June. Assume that sales for the month were \$1,035,000 and the company’s effective income tax rate was 35%. (Amounts to be deducted should be indicated with minus sign. Round your intermediate calculations to 2 decimal places. Omit the “\$” sign in your response.)

Gravois, Inc.
Absorption Income Statement
For the month of June
30
Sep
In an executive manager’s meeting
Categories: Business
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In an executive manager’s meeting, a company’s chief financial officer reported that the year-to-date net income on the company’s income statement was \$1.2 million. The chief financial officer then said, “Based on this figure, we finally have the funds we need to begin our much needed building expansion.”

Why should you consider this argument with caution? Explain.
30
Sep
Using your own words
Categories: Business
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Using your own words, define a “value statement”. Discuss how you have incorporated value statements into your resume. Provide two examples of value statements you have developed for your resume.
28
Sep
Prepare an income statement in the contribution
Categories: Business
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P12-14 Prepare a contribution margin format income statement; answer what-if questions [LO 7, 8, 9, 12]
(See the attachment for the income statement in the traditional format)

Requirement 1:
Prepare an income statement in the contribution margin format. (Omit the “\$” sign in your response.)

Requirement 2:
Calculate the contribution margin per unit and the contribution margin ratio. (Round your answers to 1 decimal place. Omit the “\$” and “%” signs in your response.)

Requirement 3:
(a) Calculate the firm’s operating income (or loss) if the volume changed from 20,000 units to 25,000 units. (Input the amount as positive value. Omit the “\$” sign in your response.)
(b) Calculate the firm’s operating income (or loss) if the volume changed from 20,000 units to 11,000 units. (Input the amount as positive value. Omit the “\$” sign in your response.)

Requirement 4:
Refer to your answer to requirement 1 when total revenues were \$160,000.
(a) Calculate the firm’s operating income (or loss) if unit selling price and variable expenses do not change, and total revenues increase by \$18,000. (Input the amount as positive value. Omit the “\$” sign in your response.)
(b) Calculate the firm’s operating income (or loss) if unit selling price and variable expenses do not change, and total revenues decrease by \$12,000. (Input the amount as positive value. Omit the “\$” sign in your response.)

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