Problem 19-5A Viejo Company Nuevo Company Warning Don\'t show me this message ag
ID: 2482213 • Letter: P
Question
Problem 19-5A
Viejo Company
Nuevo Company
Warning
Don't show me this message again for the assignment
Ok
Cancel
Contribution Margin Ratio
Warning
Don't show me this message again for the assignment
Ok
Cancel
Break-even Point
Warning
Don't show me this message again for the assignment
Ok
Cancel
Margin of Safety Ratio
Warning
Don't show me this message again for the assignment
Ok
Cancel
Degree of Operating Leverage
Warning
Don't show me this message again for the assignment
Ok
Cancel
Viejo Company
Nuevo Company
Warning
Don't show me this message again for the assignment
Ok
Cancel
Viejo Company
Nuevo Company
Warning
Don't show me this message again for the assignment
Ok
Cancel
Save for later
Submit Answer
Warning
Your instructor has reset your attempts for this question. The question will reload in the original state.
Click “Continue” to proceed with the question.
CONTINUE
Problem 19-5A
The following CVP income statements are available for Viejo Company and Nuevo Company.Viejo Company
Nuevo Company
Sales $ 401,400 $ 401,400 Variable costs 168,588 72,252 Contribution margin 232,812 329,148 Fixed costs 170,000 266,336 Net income $ 62,812 $ 62,812Warning
Don't show me this message again for the assignment
Ok
Cancel
Calculate Contribution margin ratio. (Round answers to 2 decimal places, e.g. 0.32.)Contribution Margin Ratio
Viejo Company Nuevo CompanyWarning
Don't show me this message again for the assignment
Ok
Cancel
Compute break-even point in dollars for each company. (Round answers to 0 decimal places, e.g. 1,225.)Break-even Point
Viejo Company $ Nuevo Company $Warning
Don't show me this message again for the assignment
Ok
Cancel
Compute margin of safety ratio for each company. (Round answers to 3 decimal places, e.g. 0.321.)Margin of Safety Ratio
Viejo Company Nuevo CompanyWarning
Don't show me this message again for the assignment
Ok
Cancel
Compute the degree of operating leverage for each company. (Round answers to 1 decimal place, e.g. 1.5.)Degree of Operating Leverage
Viejo Company Nuevo CompanyWarning
Don't show me this message again for the assignment
Ok
Cancel
Assuming that sales revenue increases by 20%, prepare a CVP income statement for each company. (Round answers to 0 decimal places, e.g. 1,225.)Viejo Company
Nuevo Company
Sales $ $ Variable costs Contribution margin Fixed costs Net income / (Loss) $ $Warning
Don't show me this message again for the assignment
Ok
Cancel
Assuming that sales revenue decreases by 20%, prepare a CVP income statement for each company. (Round answers to 0 decimal places, e.g. 1,225.)Viejo Company
Nuevo Company
Sales $ $ Variable costs Contribution margin Fixed costs Net income / (Loss) $ $Warning
Don't show me this message again for the assignment
Ok
Cancel
Question Attempts: 0 of 7 usedSave for later
Submit Answer
Copyright © 2000-2016 by John Wiley & Sons, Inc. or related companies. All rights reserved.Explanation / Answer
Contribution Margin Ratio= (Sales- Variable Expenses)/ Sales
Contribution Margin Ratio of Viejo Company = (401400-168588)/401400
Contribution Margin Ratio of Viejo Company= 0.58
Contribution Margin Ratio of Nuevo Company = (401400-72252)/401400
Contribution Margin Ratio of Nuevo Company= 0.82
Break even Point
Break even Point is the point where the sales is equal to total cost
Break even point in sales dollar = Fixed cost + Variable cost
For Viejo Company :
Break even in sales dollar = 170000+168588
Break even in dollar sales= 338,588
For Nuevo Company :
Break even in sales dollar = 266336+72252
Break even in dollar sales= 338,588
Margin of safety
Margin of Safety = (Profit * Sales) / (Sales-Variable cost)
For Viejo Company:
Margin of Safety = (62812 *401400)/ (401400-168588)
Margin of Safety = (62812 *401400) / 232812
Margin of safety = 108,296.55
For nuevo Company:
Margin of Safety = (62812 *401400)/ (401400-72252)
Margin of Safety = (62812 *401400) / 329148
Margin of safety = 76,600