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Crunchy Cones - Accounting

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Submitted By ameyapatkar1975
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(1) What amount of net income did the company report for the quarter? Explain why net income increased over the quarter. A) The company reported Net Income of $100,882 for the quarter. It rose due to the fact that: 1. There was an increase in sales. 2. In comparison to sales, fixed costs decreased.

(2) What net income will be reported for the quarter if the company increases its sales price from $2.50 to $2.75? What sales price will generate the largest net income for the quarter, and at that price, how many units will be sold? (Hint: Use the trial-and-error method, inputting different sales prices to find the sales price that maximizes net income.) A) 1. Net Income generated at a unit selling price of $2.50 is $86,307. 2. Net Income generated at a unit selling price of $2.75 is $95,994. 3. The largest net income will be generated when the unit selling price is $3.36. At this unit selling price of $3.36, the net income generated is $102,926. The quantity sold at this price is 131,094 units.

(3) Assuming a $2.50 price, what income will be reported for the quarter if the company uses an 8-year life instead of a 4-year life for purposes of depreciating its property, plant and equipment? How would this change affect the company’s net cash from operations for the quarter? Explain. A) 1. The net income generated at a selling price of $2.50 and a four-year life (depreciation) is $86,307. 2. The net income generated at a selling price of $2.50 and an eight-year life (depreciation) is $88,897.

With a four-year life (depreciation), the net cash from operations at a selling price of $2.50, is $(184,213). With an eight-year life (depreciation), the net cash from operations at a selling price of $2.50, is $(185,323).

The total accumulated depreciation with four-year life is $7,400.

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