Presented below are condensed data from the 2017 and 2018 Johnson Plumbing Corporation's income statements (in millions):
Required: Analyze Johnson Plumbing's cost-volume-profit relationships by applying the high-low method of cost estimation to the above information and complete the following:
a. Estimate the variable cost ratio.
b. Estimate annual fixed costs.
c. Compute the contribution margin ratio.
d. Compute the annual break-even point in dollars.
e. Applying these calculations, predict Johnson Plumbing's operating income if 2018 revenues are predicted as $15,000 million.
f. What factors make the above analysis appropriateness for Johnson Plumbing? What circumstances would make it inappropriate for Johnson Plumbing?

Question

Presented below are condensed data from the 2017 and 2018 Johnson Plumbing Corporation's income statements (in millions):
  Required: Analyze Johnson Plumbing's cost-volume-profit relationships by applying the high-low method of cost estimation to the above information and complete the following:
a. Estimate the variable cost ratio.
b. Estimate annual fixed costs.
c. Compute the contribution margin ratio.
d. Compute the annual break-even point in dollars.
e. Applying these calculations, predict Johnson Plumbing's operating income if 2018 revenues are predicted as $15,000 million.
f. What factors make the above analysis appropriateness for Johnson Plumbing? What circumstances would make it inappropriate for Johnson Plumbing?

Quizplus · Accepted Answer

The Answer of Presented below are condensed data from the 2017 and 2018 Johnson Plumbing Corporation's income statements (in millions):
  Required: Analyze Johnson Plumbing's cost-volume-profit relationships by applying the high-low method of cost estimation to the above information and complete the following:
a. Estimate the variable cost ratio.
b. Estimate annual fixed costs.
c. Compute the contribution margin ratio.
d. Compute the annual break-even point in dollars.
e. Applying these calculations, predict Johnson Plumbing's operating income if 2018 revenues are predicted as $15,000 million.
f. What factors make the above analysis appropriateness for Johnson Plumbing? What circumstances would make it inappropriate for Johnson Plumbing?

Presented Below Are Condensed Data from the 2017 and 2018