4:08 PM Wed Oct 2 92% Horngrens-Cost-Accounting-A-Managerial-Emphasis-16th-Edition-PDF-eTextBook PDF 3. Mr. Welch estimates that he can increase
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Question 3-36.

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4:08 PM Wed Oct 2
92%
Horngrens-Cost-Accounting-A-Managerial-Emphasis-16th-Edition-PDF-eTextBook PDF
3. Mr. Welch estimates that he can increase units sold, and hence revenues by 25% by incurring addi-
tional advertising costs of $8,000. Calculate the impact of the additional advertising costs on operating
income.
4. What other actions can Mr. Welch take to improve operating income?
3-36 Contribution margin, gross margin, and margin of safety. Juicy Beauty manufactures and sells a
face cream to small specialty stores in the greater Los Angeles area. It presents the monthly operating
income statement shown here to George Lopez, a potential investor in the business. Help Mr. Lopez under-
stand Juicy Beauty's cost structure.
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1
Juicy Beauty
2
Operating Income Statement June, 2017
3
Units sold
20,000
4
Revenues
$200,000
5
Cost of goods sold
6
Variable manufacturing costs
$110,000
7
Fixed manufacturing costs
40,000
8
Total cost of goods sold
150,000
9
Gross margin
50,000
10
Operating costs
11
Variable marketing costs
$ 10,000
12
Fixed marketing & admin costs
20,000
13
Total operating costs
30,000
14
Operating income
$ 20,000
OO CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS
Required
1. Recast the income statement to emphasize contribution margin.
2. Calculate the contribution margin percentage and breakeven point in units
June 2017.
3. What is the margin of safety (in units) for June 2017?
4. If sales in June were only 16,000 units and Juicy Beauty's tax rate is 30%, calculat
3-37 Uncertainty and expected costs. Kindmart is an international retail store kind
considering implementing a new business-to-business (B2B) information syste
dise orders. The current system costs Kindmart $2,000,000 per month and $55 per ord

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20191003 8 Table.png

Juicy Beauty
Percenta
Operating Income Statement June, 2017
ge
Units sold
20000
Revenues
200000
100%
Variable Cost
Variable Manufacturing Cost
110000
Variable Marketing Cost
10000
Total Variable...

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