Cost accouning | Accounting homework help

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In your monthly Chamber of Commerce meeting you heard that some of your peers running other businesses changed from a traditional income statement approach to a contribution margin approach. Your peers said this helps show the importance of volume levels to the businesses profitability.

You know that by using the contribution format income statement you can change what projected profits look like by changing your classification of fixed vs. variable type costs.

Prepare a memo to your CFO which does the following:

Summarize what a contribution format income statement depicts, as compared to the traditional format.
Using the following company data, show how the two income statement formats would look side by side.
Explain why the contribution approach is more useful to project profits. As an example, show your calculations when using a projected sales increase of 20%.

Using the following data, show how expected profits would be different if there was a sales increase of 10% and she used variable COGS of 50% vs. 60%. As an offset, this implies an increase in fixed COGS of $1,000,000.

Company Data to use for Parts 2 & 4

Last year’s sales	$10,000,000
Variable cost as a % of sales	60%
Fixed costs of manufacturing	$2,000,000
Variable selling and administrative costs as % of sales	10%
Fixed selling and administrative costs	$1,000,000
Reported profit	$0

Please submit your assignment.

The following rubric will be used for grading:

Grading Rubric
10%	Explain what a contribution-format income statement depicts as compared with the traditional format.
30%	Using the company data, show how the 2 income statement formats would look side by side.
15%	Explain exactly why the contribution approach is more useful to project profits.
15%	As an example, show your calculations when using a projected sales increase of 20%.
15%	Identify and explain the ethical issues involved when you can change what projected profits look like by changing your classification of fixed versus variable costs.
15%	Using the data, show how expected profits would be different if there were a sales increase of 10% and the CFO used variable COGS of 50% vs. 60%.

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July 1, 2023

Multiple Choice Questions

66.A merchandiser:

A.Earns net income by buying and selling merchandise.

B.Receives fees only in exchange for services.

C.Earns profit from commissions only.

D.Earns profit from fares only.

E.Buys products from consumers.

67.Cost of goods sold:

A.Is another term for merchandise sales.

B.Is the term used for the expense of buying and preparing merchandise for sale.

C.Is another term for revenue.

D.Is also called gross margin.

E.Is a term only used by service firms.

68.A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

A.$(417,000).

B.$695,000.

C.$278,000.

D.$417,000.

E.$973,000.

69.A company has sales of $375,000 and its gross profit is $157,500. Its cost of goods sold equals:

A.$(217,000).

B.$375,000.

C.$157,500.

D.$217,500.

E.$532,500.

70.The following statements regarding gross profit are true except:

A.Gross profit is also called gross margin.

B.Gross profit less other operating expenses equals income from operations.

C.Gross profit is not calculated on the multiple-step income statement.

D.Gross profit must cover all operating expenses to yield a return for the owner of the business.

E.Gross profit equals net sales less cost of goods sold.

71.The following statements regarding merchandise inventory are true except:

A.Merchandise inventory is reported on the balance sheet as a current asset.

B.Merchandise inventory refers to products a company owns and intends to sell.

C.Merchandise inventory may include the costs of freight in and making them ready for sale.

D.Merchandise inventory appears on the balance sheet of a service company.

E.Purchasing merchandise inventory is part of the operating cycle for a business.

72.The following statements are true regarding the operating cycle of a merchandising company except:

A.The operating cycle begins with the purchase of merchandise.

B.The operating cycle is shortened by credit sales.

C.The operating cycle ends with the collection of cash from the sale of merchandise.

D.The operating cycle can vary in length among different merchandising companies.

E.The operating cycle sometimes involves accounts receivable.

73.Merchandise inventory:

A.Is a long-term asset.

B.Is a current asset.

C.Includes supplies the company will use in future periods.

D.Is classified with investments on the balance sheet.

E.Must be sold within one month.

74.The operating cycle for a merchandiser that sells only for cash moves from:

A.Purchases of merchandise to inventory to cash sales.

B.Purchases of merchandise to inventory to accounts receivable to cash sales.

C.Inventory to purchases of merchandise to cash sales.

D.Accounts receivable to purchases of merchandise to inventory to cash sales.

E.Accounts receivable to inventory to cash sales.

75.The current period's ending inventory is:

A.The next period's beginning inventory.

B.The current period's cost of goods sold.

C.The prior period's beginning inventory.

D.The current period's net purchases.

E.The current period's beginning inventory.