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The document provides contribution margin income statements for McGregor Pen Company and Zealand Manufacturing Company for years ended December 31, 20X0 and 2012 respectively. Key details include McGregor Pen Company generating $2,361,660 in net income from $16,510,400 in total sales and Zealand Manufacturing Company generating $5,316,000 in operating income from $14,000,000 in total sales. The document also includes analysis of the impact of a special order on McGregor's income and the effects of decreasing sales on Zealand's income statement.

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Ahmed Youssri Teleeba
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69 views

Last Assign.

The document provides contribution margin income statements for McGregor Pen Company and Zealand Manufacturing Company for years ended December 31, 20X0 and 2012 respectively. Key details include McGregor Pen Company generating $2,361,660 in net income from $16,510,400 in total sales and Zealand Manufacturing Company generating $5,316,000 in operating income from $14,000,000 in total sales. The document also includes analysis of the impact of a special order on McGregor's income and the effects of decreasing sales on Zealand's income statement.

Uploaded by

Ahmed Youssri Teleeba
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Ahmed youssri Abdel Rahman

5-2A Special order

McGregor pen company

contribution margin income statement

for year ended 31 dec. 20X0

Without $/pen Special order Total


special order
Sales 15,900,000 5.3 610,400 4.36 16,510,400
Variable cost:
Manufacturing VC 5,850,000 1.95 322,000 1.95+.35=2.3 6,172,000
Selling & adm. VC 573,000 0.191 26,740 0.191 596,740
3% sales commision 477,000 0.159 0 0 477,000
Total variable cost 6,900,00 2.3 348,740 2.491 7,248,740
Contribution margin 9,000,000 3 261,660 1.869 9,261,660
Fixed cost:
Manf. fixed cost 3,600,000 1.2 0 0 3,600,000
Fixed selling &adm. 3,300,000 1.1 0 0 3,300,000
Total fixed cost 6,900,000 2.3 0 0 6,900,000
Net income 2,100,000 0.70 261,660 1.869 2,361,660

by manufacturing 140,000 extra pen operating income will increase by 12.46 %

I disagree with his decision as the operating income will increase without any increase in the fixed cost
5-B1

zealand Manufacturing company

contribution income stat.

for year ending 31 Dec 2012

Sales 14,000,000
Variable costs:
Direct materials 3,500,000
Direct Labor 1,700,000
Variable indirect man. cost:
Cutting bits used 53,000
Abrasives for machining 99,000
Indirect labor 950,000
1,102,000 6,302,000
Variable selling expenses:
Sales commissions 470,000
Shipping expenses 320,000
Variable adminstrative expenses:
Variable clerical salaries 370,000
1,160,000
Total variable expenses 7,462,000
Contribution margin 6,538,000
Fixed expenses:
Manufac. 692,000
Adm. executive salaries 100,000
Advertising 430,000
Total fixed expenses 1,222,000

Operating income 5,316,000


zealand manufacturing company

absorption income statement

for the year ended in 31 dec. 2012

Sales 14,000,000
COGS:

DM 3,500,000
DL 1,700,000
Indirect manufacturing costs 1,794,000
Gross profit 7,006,000

Selling expenses :

Selling commissions 470,000


advertising 430,000
Shipping exp. 320,000

Adm. exp:
Executive salaries 100,000
Clerical salaries 370,000

5,316,000
Operating income
if the sales are decreased by 2,000,000 the contributin margin statement will be used ,so for the same
proportions

14,000,000 variable costs 7,426,000 net income 5,316,000

therefore 12,000,000 variable costs = 6,365,143 net income 4,412,857 income ratio to sales will
decrease.

5-31

Sales 780,000
COGS:
DM 180,000
DL 230,000
COGS 410,000
Gross profit 370,000
Indirect manf. cost 210,000
Selling & adm. exp. 130,000
Operating income 30,000
Conversion cost 440,000
5-32

Sales = 990

DM = 250

DL = 140

Variable overhead = 65

variable selling and adm. = 115

Contribution margin = 420

fixed overhead = 110

fixed selling & adm. = 75

operating income = 235

5-33

sales = 920

DM = 350

DL = 210

Indirect man. costs

variable 100

fixed 50

variable manf. costs of goods sold 660

manufacturing COGS 710

selling & adm. exp.

variable 90

fixed 80

gross profit 210

CM 170

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