2010-05-17_073839_Benetton

2010-05-17_073839_Benetton - To answer the questions you...

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To answer the questions you must use this link: http://media.corporate- ir.net/media_files/irol/11/114079/reports/2004ar.pdf 1. How do the formats of the income statements shown on pages 33 and 50 of Benetton’s annual report differ from one another (disregard everything beneath the line titled “income from operations”)? Which expenses shown on page 50 appear to have been reclassified as variable selling costs on page 33? 2.Why do you think cost of sales is included in the computation of contribution margin on page 33? 3.Perform two separate computations of Benetton’s break-even point in Euros. For the first computation, use data from 2003. For the second computation, use data from 2004. Why do the numbers that you computed differ from one another? 4.What sales volume would have been necessary in 2004 for Benetton to attain a target income from operations of €300 million? 5.Compute Benetton’s margin of safety using data from 2003 and 2004.Why do your answers for the two years differ 1. The income statement on page 50 is prepared using an absorption format. The income statement on page 33 is prepared using a contribution format. The annual report says that the contribution format income statement shown on page 33 is used for internal reporting purposes; nonetheless, Benetton has chosen to include it in the annual report. The contribution format income statement treats all cost of sales as variable costs. The selling, general and administrative expenses shown on the absorption income statement have been broken down into variable and fixed components in the contribution format income statement. It appears the Distribution and Transport expenses and the Sales Commissions have been reclassified as variable selling costs on the contribution format income statement. The sum of these two expenses according to the absorption income statement on page 50 is €103,561 and €114,309 in 2004 and 2003, respectively. If these numbers are rounded to the nearest thousand, they agree with the variable

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This note was uploaded on 01/11/2012 for the course ACCOUNTING 505 taught by Professor Layvand during the Spring '08 term at Keller Graduate School of Management.

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2010-05-17_073839_Benetton - To answer the questions you...

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