Question

Presented below are condensed data from the 2017 and 2018 Johnson Plumbing Corporation’s income statements (in millions):

2017 2018

Revenues $15,060 $12,260

Operational Expenses 9,660 8,120

Operating Income $5,400 $4,140

Required: Analyze Johnson Plumbing’s cost-volume-profit relationships by applying the high-low method of cost estimation to the above information and complete the following:

a. Estimate the variable cost ratio.

b. Estimate annual fixed costs.

c. Compute the contribution margin ratio.

d. Compute the annual break-even point in dollars.

e. Applying these calculations, predict Johnson Plumbing’s operating income if 2018 revenues are predicted as $15,000 million.

f. What factors make the above analysis appropriateness for Johnson Plumbing? What circumstances would make it inappropriate for Johnson Plumbing?

Please use Excel spreadsheet with formulas so I can better understand it. Thank you!

Answer 1

The answer is very straight and small, and hence i have shown step by step answer in writing. You will be able to understand it more clearly.