Question

Net Income Planning

Selected operating data for Venora Company in four independent situations are shown below.

Fill in the blanks for each independent situation.

	A		B		C		D
Sales	$400,000		Answer	c.	Answer	e.	$350,000
Variable expense	Answer	a.	$56,000		Answer	f.	Answer	g.
Fixed expense	Answer	b.	$56,000		$240,000		$150,000
Net income before tax (loss)	$48,000		$16,000		$124,000		$(10,000)
Units sold	7,000		Answer	d.
Unit contribution margin	$20		$9
Contribution margin ratio					0.7		Answer	h.

Answer 1

Unit Contribution margin= Contribution- Contribution= Contribution margin ratio = Sale price per unit - variable cost per unit Sales - Variable expenses OR Fixed expenses + Net operating income Contribution / Sales For Situation A Sales= $400000 Units = 7000 Sale price per unit = $400000/ 7000 Sale price per unit = $57.14 Contribution margin= Contribution margin= $20 $20 Sale price per unit - variable cost per unit $57.14 - Variable cost per unit Variable cost per unit = Variable cost per unit = $57.14 - $20 $37.143 Variable expenses = Variable expenses = Variable expenses = Variable cost per unit X no. Of units $37.143 X 7000 $260000 Net income before tax = $48000= Fixed expenses = Fixed expenses = Sale - variable expenses - fixed expenses $400000 - $260000 - Fixed expenses $400000 - $260000-$48000 $92000

For situation B Net income before tax = $16000= Sale= Sale= Sale - variable expenses - fixed expenses Sale - $56000 - $56000 $16000+ $56000 + $56000 $128000 Contribution = Sale - variable expenses Contribution- $128000-$56000 Contribution- $72000 Unit contribution margin = Unit contribution margin = $9= Total units sold Total units sold= $9 Total Contribution / total units sold $72000 / Total units sold $72000 / $9 8000 For situation Contribution = Contribution = Contribution = Fixed expenses+ net income $240000+ $124000 $364000 Contribution margin ratio= 0.7 = Sales= Sales Contribution / Sales $364000 / Sales $364000 / 0.7 $520000 Net income before tax = $124000= Variable expenses = Variable expenses = Sale - variable expenses - fixed expenses $520000- Variable expenses - $240000 $520000-$240000-$124000 $156000 otshoot

For situation D Net income before tax = ($10000) = Variable expenses = Variable expenses = Sale - variable expenses - fixed expenses $350000- Variable expeses - $150000 $350000 - $150000 + $10000 $210000 Contribution = Sales - Variable expenses contribution = $350000-$210000 Contribution = $140000 Contribution margin ratio= Contribution margin ratio= Contribution margin ratio= Contribution / Sales $140000 / $350000 0.40 Sales Variable expenses Fixed expenses Net income before tax (loss) Units sold Unit contribution margin contribution margin ratio A B C D $4,00,000 $1,28,000 $5,20,000 $3,50,000 $2,60,000 $56,000 $1,56,000 $2,10,000 $92,000 $56,000 $2,40,000 $1,50,000 $48,000 $16,000 $1,24,000-$10,000 7000 8000 $20 $9