Ch.09 Kinney 9e SM Final.doc-CHAPTER 9 B...
Ch.09_Kinney_9e_SM_Final.doc-CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT
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Ch.09 Kinney 9e SM Final.doc-CHAPTE...
Ch.09_Kinney_9e_SM_Final.doc-CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT
##### Page 27
Chapter 9
287
Income Statements
2013
2014
Sales
\$ 600,000
\$ 840,000
Less variable expense
a
(180,000
)
(252,000
)
Contribution margin
b
\$ 420,000
\$ 588,000
Less fixed expenses
(300,000
)
(300,000
)
Net income before tax
c
\$ 120,000
\$ 288,000
Tax expense
(48,000
)
(115,200
)
Net income
\$
72,000
\$ 172,800
a
Variable expense = Sales less contribution margin
2013 = \$600,000
\$420,000 = \$180,000
2014 = \$840,000
\$588,000 = \$252,000
b
Contribution margin = Net income before tax + Fixed costs
2013 = \$120,000 + \$300,000 = \$420,000
2014 = \$288,000 + \$300,000 = \$588,000
c
Net income before tax =
2013 = \$ 72,000 ÷ (1
0.40) = \$120,000
2014 = \$172,800 ÷ (1
0.40) = \$288,000
b.
Break-even
sales
2013
2014
Olson
\$60,000 ÷ (\$180,000 ÷ \$600,000)
\$200,000
\$60,000 ÷ (\$288,000 ÷ \$960,000)
\$200,000
Miami
\$300,000 ÷ (\$420,000 ÷ \$600,000)
428,572
\$300,000 ÷ (\$588,000 ÷ \$840,000)
428,572
c.
Olson
Profit before taxes = 0.12(of investment); tax rate = 40%
= 0.12(\$1,200,000) = \$144,000
Profit after taxes
= \$144,000 ÷ (1
0.4) = \$240,000
(\$60,000 + \$240,000) ÷ 0.30 = \$1,000,000
Miami
Profit before taxes = 0.12(of investment); tax rate = 40%
= 0.12(\$1,200,000) = \$144,000
Profit after taxes
= \$144,000 ÷ (1
0.4) = \$240,000
(\$300,000 + \$240,000) ÷ 0.70 = \$771,429
d.
Margin of safety = Actual sales – Break-even sales
Olson
2013
\$600,000
\$200,000 = \$400,000
2014
\$960,000
\$200,000 = \$760,000
Miami
2013
\$600,000
\$428,572 = \$171,428
2014
\$840,000
\$428,572 = \$411,428
Operating leverage = Contribution margin ÷ Profit before tax
accessible website, in whole or in part.

##### Page 28
288
Chapter 9
Olson
2013
\$180,000 ÷ \$120,000 = 1.50
2014
\$288,000 ÷ \$228,000 = 1.26
Miami
2013
\$420,000 ÷ \$120,000 = 3.50
2014
\$588,000 ÷ \$288,000 = 2.04
e.
Olson
Miami
Contribution margin
\$ 288,000
\$ 588,000
Increase (1.15 × CM)
\$ 331,200
\$ 676,200
Less fixed costs
(60,000
)
(300,000
)
Net income before taxes
\$ 271,200
\$ 376,200
Taxes (40%)
(108,480
)
(150,480
)
Net income
\$ 162,720
\$ 225,720
f.
Olson
Miami
Contribution margin
\$288,000
\$ 588,000
Decrease (0.80 × CM)
\$230,400
\$ 470,400
Less fixed costs
(60,000
)
(300,000
)
Net income before taxes
\$170,400
\$ 170,400
Taxes (40%)
(68,160
)
(68,160
)
Net income
\$102,240
\$ 102,240
g.
Olson
49.
a.
Dayton Company
Income Statement (Variable Costing)
accessible website, in whole or in part.
Miami

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