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    Whitney Company

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    RIZA JOY CAÑETE DELARAGA
    The Whitney Company had a net operating loss in the first year due to low sales volume. In the second year, the vice president and sales manager proposed increasing sales which would eliminate losses under both proposals. However, the sales manager's proposal with higher sales commission cost generated a higher net operating income.

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    Whitney Company

    Uploaded by

    RIZA JOY CAÑETE DELARAGA
    119 views4 pages
    The Whitney Company had a net operating loss in the first year due to low sales volume. In the second year, the vice president and sales manager proposed increasing sales which would eliminate losses under both proposals. However, the sales manager's proposal with higher sales commission cost generated a higher net operating income.

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    Whiney Company Case for Managerial Accounting

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    The Whitney Company had a net operating loss in the first year due to low sales volume. In the second year, the vice president and sales manager proposed increasing sales which would eliminate losses under both proposals. However, the sales manager's proposal with higher sales commission cost generated a higher net operating income.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Download as docx, pdf, or txt
    119 views4 pages

    Whitney Company

    Uploaded by

    RIZA JOY CAÑETE DELARAGA
    The Whitney Company had a net operating loss in the first year due to low sales volume. In the second year, the vice president and sales manager proposed increasing sales which would eliminate losses under both proposals. However, the sales manager's proposal with higher sales commission cost generated a higher net operating income.

    Copyright:

    © All Rights Reserved
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    of 4

    CLASS CASE # 3- WHITNEY COMPANY

    1.

    Whitney Company
    Income Statement
    For the Year Ended December 31
           
        Total Unit
    Sales (45,000 units sold)   450,000 10
    Less: Variable Expenses      
      Direct Materials 90,000 2.00
      Direct Labor 78,300 1.74
      Manufacturing Overhead 13,500 0.30
      Shipping 5,400 0.12
      Sales Commission 27,000 0.6
      Variable Admin 1,800 0.04
    Contribution Margin   234,000 5.20
    Less: Fixed Expenses      
      Manufacturing Overhead 85,000 1.888888889
      Advertising, Salaries 120,000 2.666666667
      Administrative 48,000 1.066666667
    Net Operating Loss   -19,000 -0.42

    2A Vice President Proposal


    Whitney Company
    Projected Income Statement
    For the next Year Ended December 31

    Total Unit
    Sales (75,000 units sold) $ 600,000 $ 8
    Less: Variable Expenses
    Direct Materials 150,000 2.00
    Direct Labor 130,500 1.74
    Manufacturing Overhead 22,500 0.30
    Shipping 9,000 0.12
    Sales Commission 27,000 0.6
    Variable Admin 3,000 0.04
    Contribution Margin $ 240,000 $ 3.20
    Less: Fixed Expenses
    Manufacturing Overhead 85,000
    Advertising, Salaries 120,000
    Administrative 48,000
    Net Operating Loss $ -13,000 $ -0.1733333

    2B- Sales Manager Proposal


    Whitney Company
    Projected Income Statement
    For the next Year Ended December 31

    Total Unit
    Sales (75,000 units sold) $ 900,000 $ 12
    Less: Variable Expenses
    Direct Materials 150,000 2.00
    Direct Labor 130,500 1.74
    Manufacturing Overhead 22,500 0.30
    Shipping 9,000 0.12
    Sales Commission 108,000 1.44
    Variable Admin 3,000 0.04
    Contribution Margin $ 423,000 $ 6.36
    Less: Fixed Expenses
    Manufacturing Overhead 85,000
    Advertising, Salaries 220,000
    Administrative 48,000
    0.93333333
    70,000
    Net Operating Income $ $ 3

    3
    Whitney Company
    Income Statement
    For the next Year Ended December 31

    Total Unit
    Sales (48,000 units sold) $ 480,000 $ 10
    Less: Variable Expenses
    Direct Materials 62,400 1.30
    Direct Labor 83,520 1.74
    Manufacturing Overhead 14,400 0.30
    Shipping 5,760 0.12
    Sales Commission 28,800 0.6
    Variable Admin 1,920 0.04
    Contribution Margin $ 283,200 $ 5.90
    Less: Fixed Expenses
    Manufacturing Overhead 85,000
    Advertising, Salaries 120,000
    Administrative 48,000
    Net Operating Income $ 30,200
    4
    Whitney Company
    Income Statement
    For the Year Ended December 31

    Total Unit
    Sales (60,000 units sold) $ 600,000 $ 10
    Less: Variable Expenses
    Direct Materials 120,000 2.00
    Direct Labor 104,400 1.74
    Manufacturing
    18,000 0.30
    Overhead
    Shipping 7,200 0.12
    Sales Commission 36,000 0.6
    Variable Admin 2,400 0.04
    Contribution Margin $ 312,000 $ 5.20
    Less: Fixed Expenses
    Manufacturing
    85,000
    Overhead
    Advertising, Salaries 152,000
    Administrative 48,000
    Net Operating Income $ 27,000

    Whitney Company

    Income Statement
    For the Year Ended December 31

    Total Unit

    Sales (9,500 units sold) 320780 33.77

    Less: Variable Expenses

    Direct Materials 19,000 2.00

    Direct Labor 16,530 1.74

    Manufacturing Overhead 2,850 0.30

    Shipping 8,100 0.852631579

    Variable Admin 1,350 0.142105263

    Insurance 5,700

    Contribution Margin 267,250 4.26


    Less: Fixed Expenses

    Manufacturing Overhead 85,000

    Advertising, Salaries 120,000

    Administrative 48,000

    Net Operating Income 14,250

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