Chat with AI
Managerial Accounting 17th Edition by Ray Garrison,Eric Noreen,Peter Brewer
Edition 17ISBN: 978-1260247787Managerial Accounting 17th Edition by Ray Garrison,Eric Noreen,Peter Brewer
Edition 17ISBN: 978-1260247787 Exercise 1
Explanation
Verified
Verified
The completed worksheet is shown below.
![The completed worksheet is shown below. The completed worksheet, with formulas displayed, is shown below. [Note: To display formulas in cells instead of their calculated amounts, consult Excel Help.] 1. When the variable selling cost is changed to $900, the worksheet changes as show below: The gross margin is $6,000; the same as it was before. It did not change because the variable selling expense is deducted after the gross margin, not before it on the traditional format income statement. 2. The new worksheet appears below: The variable costs increased by 10% when the sales increased by 10%, however the fixed costs did not increase at all. By definition, total variable cost increases in proportion to activity whereas total fixed cost is constant. (In the real world, cost behavior may be messier.) The contribution margin also increased by 10%, from $5,000 to $5,500, because both of its components-sales and variable costs-increased by 10%. The net operating income increased by more than 10%, from $1,000 to $1,500, because even though sales and variable expenses increased by 10%, the fixed costs did not increase by 10%.](https://d2lvgg3v3hfg70.cloudfront.net/SM4431/11edd6c0_7cc6_5218_9037_a942bc4b26b9_SM4431_00.jpg)
The completed worksheet, with formulas displayed, is shown below.
![The completed worksheet is shown below. The completed worksheet, with formulas displayed, is shown below. [Note: To display formulas in cells instead of their calculated amounts, consult Excel Help.] 1. When the variable selling cost is changed to $900, the worksheet changes as show below: The gross margin is $6,000; the same as it was before. It did not change because the variable selling expense is deducted after the gross margin, not before it on the traditional format income statement. 2. The new worksheet appears below: The variable costs increased by 10% when the sales increased by 10%, however the fixed costs did not increase at all. By definition, total variable cost increases in proportion to activity whereas total fixed cost is constant. (In the real world, cost behavior may be messier.) The contribution margin also increased by 10%, from $5,000 to $5,500, because both of its components-sales and variable costs-increased by 10%. The net operating income increased by more than 10%, from $1,000 to $1,500, because even though sales and variable expenses increased by 10%, the fixed costs did not increase by 10%.](https://d2lvgg3v3hfg70.cloudfront.net/SM4431/11edd6c0_7cc6_5219_9037_6bc8479bd48a_SM4431_00.jpg)
[Note: To display formulas in cells instead of their calculated amounts, consult Excel Help.]
1. When the variable selling cost is changed to $900, the worksheet changes as show below:
![The completed worksheet is shown below. The completed worksheet, with formulas displayed, is shown below. [Note: To display formulas in cells instead of their calculated amounts, consult Excel Help.] 1. When the variable selling cost is changed to $900, the worksheet changes as show below: The gross margin is $6,000; the same as it was before. It did not change because the variable selling expense is deducted after the gross margin, not before it on the traditional format income statement. 2. The new worksheet appears below: The variable costs increased by 10% when the sales increased by 10%, however the fixed costs did not increase at all. By definition, total variable cost increases in proportion to activity whereas total fixed cost is constant. (In the real world, cost behavior may be messier.) The contribution margin also increased by 10%, from $5,000 to $5,500, because both of its components-sales and variable costs-increased by 10%. The net operating income increased by more than 10%, from $1,000 to $1,500, because even though sales and variable expenses increased by 10%, the fixed costs did not increase by 10%.](https://d2lvgg3v3hfg70.cloudfront.net/SM4431/11edd6c0_7cc6_521a_9037_857dc398999f_SM4431_00.jpg)
The gross margin is $6,000; the same as it was before. It did not change because the variable selling expense is deducted after the gross margin, not before it on the traditional format income statement.
2. The new worksheet appears below:
![The completed worksheet is shown below. The completed worksheet, with formulas displayed, is shown below. [Note: To display formulas in cells instead of their calculated amounts, consult Excel Help.] 1. When the variable selling cost is changed to $900, the worksheet changes as show below: The gross margin is $6,000; the same as it was before. It did not change because the variable selling expense is deducted after the gross margin, not before it on the traditional format income statement. 2. The new worksheet appears below: The variable costs increased by 10% when the sales increased by 10%, however the fixed costs did not increase at all. By definition, total variable cost increases in proportion to activity whereas total fixed cost is constant. (In the real world, cost behavior may be messier.) The contribution margin also increased by 10%, from $5,000 to $5,500, because both of its components-sales and variable costs-increased by 10%. The net operating income increased by more than 10%, from $1,000 to $1,500, because even though sales and variable expenses increased by 10%, the fixed costs did not increase by 10%.](https://d2lvgg3v3hfg70.cloudfront.net/SM4431/11edd6c0_7cc6_521b_9037_179dfb0e76e2_SM4431_00.jpg)
The variable costs increased by 10% when the sales increased by 10%, however the fixed costs did not increase at all. By definition, total variable cost increases in proportion to activity whereas total fixed cost is constant. (In the real world, cost behavior may be messier.)
The contribution margin also increased by 10%, from $5,000 to $5,500, because both of its components-sales and variable costs-increased by 10%.
The net operating income increased by more than 10%, from $1,000 to $1,500, because even though sales and variable expenses increased by 10%, the fixed costs did not increase by 10%.
The completed worksheet, with formulas displayed, is shown below. [Note: To display formulas in cells instead of their calculated amounts, consult Excel Help.]1. When the variable selling cost is changed to $900, the worksheet changes as show below:
The gross margin is $6,000; the same as it was before. It did not change because the variable selling expense is deducted after the gross margin, not before it on the traditional format income statement.2. The new worksheet appears below:
The variable costs increased by 10% when the sales increased by 10%, however the fixed costs did not increase at all. By definition, total variable cost increases in proportion to activity whereas total fixed cost is constant. (In the real world, cost behavior may be messier.)The contribution margin also increased by 10%, from $5,000 to $5,500, because both of its components-sales and variable costs-increased by 10%.
The net operating income increased by more than 10%, from $1,000 to $1,500, because even though sales and variable expenses increased by 10%, the fixed costs did not increase by 10%.
Managerial Accounting 17th Edition by Ray Garrison,Eric Noreen,Peter Brewer
Why don’t you like this exercise?
Other Minimum 8 character and maximum 255 character
Character 255
