Exercise CF_A1 Spring 2013 Classified balance sheet Prepare a balance sheet at the year end Jerrison Company operates a wholesale hardware business. The following balance sheet accounts and balances are available for Jerrison at December 31, 2012 Accounts Payable Accouts Receivable Accumulated depreciation, data processing equipment Accumulated depreciation, warehouse Accumulated depreciation, warehouse operations equipment Bonds payable (due 2020) Building warehouse Capital stock Cash Equipment ,data processing Equipment warehouse operations Income taxes payable Interest payable Inventory (merchandize) Land Long term investments in equity securities Notes payable (due 6/1/2013) Prepaid insurance (a months) Retained earnings 12/31/2012 Salaries payable Short term investment in marketable securities

62,100 96,300 172,400 216,800 31,200 200,000 419,500 250,000 8,400 309,000 106,100 21,600 12,200 187,900 41,000 31,900 50,000 5,700 14,400 21,000

Questions Operating leverage and break even point Explain the concept of break even point Explain the concept of finacial and operating leverage Explain and give examples of fixed costs and variable costs Characterize the concept of contribution margin Explain the concept of relevant range How do you estimate the sensitivity from operating data? provide a simple example

Break-even point multiple products Tim's bicycle shop sells 21 speed bicycles. For a purposes of CVP analysis, the shop owner has divided sales into two categories, as follows: Product Type: High quality Medium quality

Sales proce 500 300

Three quarters of the shop's sales are medium quality bikes. The shop's annual fixed expenses are: $ 65 000. Ignore taxes 1 2 3 4 5

Compute the unit contribution margin for each product type What is the shop's sales mix ? Compute the unit average contribution margin, assuming a constant sales mix. What is the shop's break-even sales volume in dollars? Assume a constant sales mix. How many bicycles of each type must be sold to earn a target income of $ 48 750? Assume a constant sales mix.

Invoice cost 275 135

Sales commission 25 15

Exercise CF_A1 Spring 2013 Classified balance sheet Jerrison Company operates a wholesale hardware business. The following balance sheet accounts and balances are available for Jerrison at December 31, 2012 Accounts Payable Accouts Receivable Accumulated depreciation, data processing equipment Accumulated depreciation, warehouse Accumulated depreciation, warehouse operations equipment Bonds payable (due 2020) Building warehouse Capital stock Cash Equipment ,data processing Equipment warehouse operations Income taxes payable Interest payable Inventory (merchandize) Land Long term investments in equity securities Notes payable (due 6/1/2013) Prepaid insurance (a months) Retained earnings 12/31/2012 Salaries payable Short term investment in marketable securities Prepare a balance sheet at the year end

62,100 96,300 172,400 216,800 31,200 200,000 419,500 250,000 8,400 309,000 106,100 21,600 12,200 187,900 41,000 31,900 50,000 5,700 14,400 21,000

Operating leverage and break even point Explain the concept of break even point Explain the concept of finacial and operating leverage Explain and give examples of fixed costs and variable costs Characterize the concept of contribution margin Explain the concept of relevant range How do you estimate the sensitivity from operating data? provide a simple example

Break-even point multiple products Tim's bicycle shop sells 21 speed bicycles. For a purposes of CVP analysis, the shop owner has divided sales into two categories, as follows: Product Type: High quality Medium quality

Sales price 500 300

Invoice Cost 275 135

Sales Commission 25 15

Three quarters of the shop's sales are medium quality bikes. The shop's annual fixed expenses are: $ 65 000. Ignore taxes 1 2 3 4 5

Compute the unit contribution margin for each product type What is the shop's sales mix ? Compute the unit average contribution margin, assuming a constant sales mix. What is the shop's break-even sales volume in dollars? Assume a constant sales mix. How many bicycles of each type must be sold to earn a target income of $ 48 750? Assume a constant sales mix.