Question

Variable Corting Income Statement and Effect on Income of Change in Operations Kimbrell Inc, manufactures three sizes of utility tables-small (S), medium (M), and large (L). The income statement has consistently indicated a net loss for the size, and management is considering three proposals (1) continue Size M. (2) discontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of Size S so that the entire plant capacity can continue to be used. of Proposal 2 is selected and Ste Mis discontinued and production curtailed, the annual fed production costs and foed operating expertes could be reduced by $142.500 and 120.350 respectively. If Proposal 3 is selected. It is anticipated that an additional annual expenditure of $85.050 for the salary of an assistant brand manager (classified as a foed operating expense) would yield an additional 130% in Size S sales volume. It is also assumed that the increased production of Size S would utilize the plant facilities released by the discontinuance of size M. The sales and costs have been relatively stable over the past few years, and they are expected to remain so for the foreseeable future. The income statement for the past year ended December 31, 2018 is as follows Sales $1.087.500 $945.000 $2022.500 $1.824.000 Cost of goods solde Variable costs Fored costs Total cost of goods sold Grens profit Operating per Variable expenses 5538.500 241.000 $779,500 5718.500 288.000 $1.006.500 5567.000 250.000 $817.000 $2.603.000 $210.500 1.000 $120.000 $110.100 $100.750 Food expenses Total operating expenses $1503 15:25 income from operations S 3 0 .00

Answer 1

solution:- Page 1 from the data- Income statement:- KIMBRELL, INCC: . Variable Costing Income statement for the year ended 31st Jan, 2018 Particular Size IS.I.MTL sales 9,90,000 10,87,500 9,45,000 30,22,500 Variable cost of goods sold 5,38,500 7,18,500 5,67,00 18,24,000 Manufacturing Margin 4,51,500 3,69,000 3, 78,000 1,98,500 Variable operating Exef, 1,18,100. 1,08,750 85,050 3,11,900 contribution margin 3,33,400 2,60,250 2,92,950 8,86,600 fixed costs Manufacturing cost 7,79,000 öperating expenses 88.900 Total fixed cost 8,67,900 Income from operation 18,700

2) If proposal 2 is accepted:- Page 2 . Particular Size S L Total contribution margin of 2,60,280 Less: Reduction in fixed 11,42,500 costs Less: Reduction in fixed operating expenses 28,350 Reduction in annual income from operation 1,70,850 89,400 3) Income statement :- KIMBRELL, INCC: Variable costing Income statement for the year ended 31st Jan. 20x8 increase in sale volume of size S' by additional 130% sale value 990000 X 130/100=1287000 then 990000 + 1287000 = 2277000 variable cost 538500 X 130/100 = 700050 then 538500 + 700050 = 1238550

size - Total Page-3 variable expenses | 118100X130/100 = 153530 then 118100 +153530 - 271630 Assuming that the cost of size 's' is also increased by 1304 If cost of size "M' is added to size 's' then relatively change the figure of variable cost and variable TExpenges. Particular SIL sales 22,77,000 9,45,000 32,22,000 Variable cost of goods sold 12,38,550 5,67,000 18,05,550 Manufacturing Margin 10,38, 450 3,78,000 14,16,450 Variable operating Exp. 2,71,630 85,050 3,56,680 contribution margin 7,66,820 2,92,950 10,59,770 Fixed costs Manufacturing cost 7,79,000 operating expenses 1,73,950 (including additional Salary) Total fined cost 9,52,950 Income from Operation 1,06,820

Page 4 4) If proposal 3 is accepted : - >> Income from operation, Pooposal 3 – 106,820 2) Income from operation, present condition - (Part 1) - 18,700 => Increase in income from operation – 88,120 Please, give me positive like.