Income statement (Single steps)

Total Revenue 26800

- Rent earned 3400
- Fees earned 23400
Total expense 14680
- Wages expense 3400
- Utilities expense 690
- Property taxes expense 1050
- Insurance expense 1240
- Shop supplies expense 780
- Depreciation expense-shop equipment 350
- Depreciation expense-building 2220
- Interest expense 4950
Net Income 12120
Balance sheet
 Assets Equity
Cash 4200 Liability 52050
Rent receivable 200 Wages payable 200
Prepaid insurance 240 Property taxes payable 450
Shop supplies 210 Interest payable 600
Shop equipment 3860 Uneared rent 800
Accumulated depreciation-shop
-1120 Long term note payable 50000
equipment
Building 57500
Accumulated depreciation- Building -6060 Owner’s equity 61980
Land 55000 Bella Hanson capital 49860
Net income (Retained
12120
earning)
Total assets 114030 Total equity 114030

- Gross profit = Total revenue – Sales return & allowances – Sales discount – Cost of goods sold
…
Journal entries:

1. Dr Cash: 35000
Cr owner’s capital: 35000
2. Dr Office supplies: 400
Cr account payable: 400
3. Dr Office equipment: 10000
Cr account payable: 8000
Cr cash: 2000
4. Dr account receivable: 4000
Cr services revenue: 4000
5. Dr rent expense: 700
Cr cash: 700
6. Dr account payable: 200
Cr cash: 200
7. Dr advertising expense: 600
Cr account payable: 600
8. Dr salaries expense: 2200
Cr cash: 2200
9. Dr cash: 3000
Cr account receivable: 3000
10. Dr prepaid insurance: 2000
Cr cash: 2000

Ledger account
 Cash
Dr Cr
Beginning: 0
(1): 35000
(3): 2000
(5): 700
(6): 200
(8): 2200
(9): 3000
(10): 2000

38000 7100
Balance: 30900

Account receivable
Dr Cr
Beginning: 0
(4): 4000
(9): 3000
Balance: 1000

Office supplies
Dr Cr
Beginning: 0
(2): 400
Balance: 400

Office equipment
Dr Cr
Beginning: 0
(3): 10000
Balance: 10000

Prepaid insurance
Dr Cr
Beginning: 0
(10): 2000
Balance: 2000

Rent expense
Dr Cr
Beginning: 0
(5): 700
 Balance: 700

Advertising expense
Dr Cr
Beginning: 0
(7): 600
Balance: 600

Salaries expense
Dr Cr
Beginning: 0
(8): 2200
Balance: 2200

Account payable
Dr Cr
Beginning: 0
(2): 400
(3): 8000
(6): 200
(7): 600
200 9000
Balance: 8800

Owner’s capital
Dr Cr
Beginning: 0
(1): 35000
Balance: 35000

Services revenue
Dr Cr
Beginning: 0
(4): 4000
Balance: 4000

Trial balance:

Account Debit Credit

Cash 30900
Account receivable 1000
Office supplies 400
Office equipment 10000
 Prepaid insurance 2000
Account payable 8800
Owner’s capital 35000
Services revenue 4000
Rent expense 700
Advertising expense 600
Salaries expense 2200
Total 47800 47800

1. Revenue = 60 x 17000 = 1020000 ($)

CM ratio = (Revenue – Variable cost)/Revenue = (1020000- Variable cost)/ 1020000 = 0,4

=> Variable cost = 612000 ($)

=> Variable cost per unit = 612000 / 17000 = 36($)

2. Break even point in Dollar = Fixed cost/ CM ratio = 360000 / 0,4 = 900000 ($)

CM per dollars = Revenue – Variable cost = 1020000 – 612000 = 408000 ($)

CM per unit = 408000/17000 = 24 ($)

Break even point in unit = Fixed cost / CM per unit = 360000 / 24 = 15000 (unit)

3.

Sales level in dollars = Variable costs + Fixed costs + Target net income = 612000 + 360000 + 90000 =
1062000 ($)

 Sales level in units = 1062000/60 = 17700 (units)

4.

CM ratio new = (Revenue – Variable cost new)/Revenue = (1020000-33 x 17000)/ 1020000 = 0,45
The new Break even point in Dollar = Fixed cost/ CM ratio new = 360000 / 0,45 = 800000 ($)

CM per dollars new = Revenue – Variable cost new = 1020000 – 33 x 17000 = 459000 ($)

CM per units = 459000 /17000 = 27 ($)

The new Break even point in unit = Fixed cost / CM per unit new= 360000 / 27 = 13333 (unit)

Công thức

Revenue (Sales) PxQ

Variable cost
Variable cost per
Variable cost/Q
unit
Revenue - Variable cost
CM in dollar
= CM per units x Q
CM per dollar/Q
CM per units
= P - Variable cost per unit
CM ratio CM per dollar/ Revenue
Break even point
Fixed cost/ CM ratio
in Dollar
Break even point
Fixed cost / CM per unit
in unit
Sales level in Variable costs + Fixed costs + Target net
dollars income
Sales level in
Sales level in dollars/P
units
Net operating
Sales revenue - Variable cost - Fixed cost
income
Δ Net operating
Δ Sales revenue - Δ Variable cost
income
1.

CM per units = P - Variable cost per unit = 50 -32 = 18 ($)

CM in dollar = CM per units x Q = 18 x 8000 = 144000 ($)

CM ratio = CM in dollar/Revenue = 144000/(50.8000) = 0,36

Break even point in Dollar = Fixed cost/ CM ratio = 108000/0,36 = 300000 ($)

Break even point in unit = Fixed cost / CM per unit = 108000/18 = 6000 (units)

2. If the variable cost per stove increase as a percentage of the selling price => CM decrease => Break
even point increases

3.

Δ Sales revenue = Sales revenue new - Sales revenue old =0,9.1,25. Sales revenue old - Sales revenue
old) = 0,125. Sales revenue old=0,125.50.8000= 50000

Δ Variable cost = Variable cost new - Variable cost old = 1,25. Variable cost old - Variable cost old =1,25
Variable cost old= 1,25.32.8000=320000

 Δ Net operating income = 50000-320000= -270000 < 0

4. Net operating income = Sales revenue - Variable cost - Fixed cost = 45.Q – 32.Q – 108000 = 35000

 Q = 11000