Problem 9-48 Name:
Insert your answers into the gray-shaded cells of columns D, F and H. Insert formulas
where appropriate. If an answer is incorrect, the word “wrong” will appear.
a.
2013 2014
Sales 600,000$ 960,000$
Less Variable Expense 420,000 672,000
Contribution Margin 180,000$ 288,000$
Less Fixed Expense 60,000 60,000
Net Income before Tax 120,000$ 228,000$
Tax Expense 48,000 91,200
Net Income 72,000$ 136,800$
2013 2014
Sales 600,000$ 840,000$
Less Variable Expense 180,000 252,000
Contribution Margin 420,000$ 588,000$
Less Fixed Expense 300,000 300,000
Net Income before Tax 120,000$ 288,000$
Tax Expense 48,000 115,200
Net Income 72,000$ 172,800$
b.
2013 2014
Olson 200,000$ 200,000$
Miami 428,572$ 428,572$
c.
Profit before taxes 144,000$
Profit after taxes 240,000$
Contribution margin percent 30%
Sales to earn desired profit 1,000,000$
Profit before taxes 144,000$
Profit after taxes 240,000$
Contribution margin percent 70%
Breakeven Sales
Olson
Miami
Income Statement
Solution
Olson
Income Statement
Miami
Sales to earn desired profit 771,429$
d.
Actual Sales –
Breakeven
Sales
=
Margin of
Safety
Olson:
2013 600,000$ 200,000$ 400,000$
2014 960,000$ 200,000$ 760,000$
Miami:
2013 600,000$ 428,572$ 171,428$
2014 840,000$ 428,572$ 411,428$
Contribution
Margin
÷
Profit Before
Tax
=
Operating
Leverage
Olson:
2013 180,000$ 120,000$ 1.50$
2014 288,000$ 228,000$ 1.26$
Miami:
2013 420,000$ 120,000$ 3.50$
2014 588,000$ 288,000$ 2.04$
e. Olson Miami
Contribution Margin 288,000$ 588,000$
Increase 331,200$ 676,200$
Less Fixed Expense 60,000 300,000
Net Income before Tax 271,200$ 376,200$
Tax Expense 108,480 150,480
Net Income 162,720$ 225,720$
f. Olson Miami
Contribution Margin 288,000$ 588,000$
Increase 230,400$ 470,400$
Less Fixed Expense 60,000 300,000
Net Income before Tax 170,400$ 170,400$
Tax Expense 68,160 68,160
Net Income 102,240$ 102,240$
g. Olson 2014 Units
Contribution
Margin
– (60,000)$
200,000 –$
1,000,000 300,000$
Miami 2014 Units
Contribution
Margin
– (300,000)$
428,571 –$
714,286 500,000$
$(100,000)
$(50,000)
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
– 250,000 500,000
Olson
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
Miami
$(400,000)
$(300,000)
$(200,000)
$(100,000)
$-
(50,000) 50,000 150,000 250,000 350,000 450,000 550,000 650,000 750,000