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1

Accounting Oct 05, 2020

1.What is the difference between Salary Expense and Pension Expension?

2.Operating Leverage

Beck Inc. and Bryant Inc. have the following operating data:

	Beck Inc.	Bryant Inc.
Sales	$315,300	$1,027,000
Variable costs	126,500	616,200
Contribution margin	$188,800	$410,800
Fixed costs	129,800	252,800
Income from operations	$59,000	$158,000

a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.

Beck Inc.
Bryant Inc.

b. How much would income from operations increase for each company if the sales of each increased by 10%? If required, round answers to nearest whole number.

	Dollars	Percentage
Beck Inc.	$		%
Bryant Inc.	$		%

3. The term differential cost refers to:

A- The benefit forgone by selecting one alternative instead of another.
B- A cost which does not involve any dollar outlay but which is relevant to the decision making process.
C- A cost which continues to be incurred even though there is no activity.
D-difference in cost which results from selecting one alternative instead of another

Create a table on a spreadsheet with columns labelled “Count”, “Date”, “Interest this Period”, and “Total”. As depicted below.

You will begin with the count at 0, and the date of Sept 30, 2016. For that first row, the “Interest this period” is zero, and the total is $39,000 CAD. Above the columns, put the label “rate”, and in the cell below that, enter your periodically compounding rate of 20%. Put the label “Timestep in years” and in the cell below that, enter =1/4.

For each subsequent row of the table, use formulas to set the count equal to one more than the previous count, and set the date equal to the previous date plus 365*[the value in the timestep cell]. The “Interest this Period” is the “Total” from the previous “Date”, times the “rate” cell, times the “timestep” cell. The “Total” for each row is the “Total” from the previous row plus the “Interest this period”. Make sure that you use dollar signs for absolute addresses where appropriate in order to be able to copy these formulas to later rows. Copy that new row, and paste it into the rows below it so that the count goes to at least 100.

You can validate your spreadsheet by checking that the total comes out right if the interest rate and initial total from a previous question is used with a timestep of 1. Don’t forget to restore the timestep and rate to the values for this problem when done.

(a)	What is the date that Excel shows for the row whose count is 100? (Copy and paste the content of that cell into the answer box below.)

(b)	What is the interest earned for the period with count 72?

Expert Solution

1.Both Salary and Pension expense are paid to employee but they differ a lot in their concept and nature.

Salary Expense -

Salaries expense is the fixed pay earned by employees. The expense represents the cost of non-hourly labor for a business. A salary is a fixed amount paid to an employee over a predetermined period of time; it is not based on the number of hours worked or number of units produced, and so should not change from period to period, unless a pay raise or reduction is implemented.

Pension Expense -

Pension expense is the amount that a business charges to expense in relation to its liabilities for pensions payable to employees. The amount of this expense varies, depending upon whether the underlying pension is a defined benefit plan or a defined contribution plan. The characteristics of these plan types are as follows:

Defined benefit plan. Under this plan, the employer provides a predetermined periodic payment to employees after they retire. The amount of this future payment depends upon a number of future events, such as estimates of employee lifespan, how long current employees will continue to work for the company, and the pay level of employees just prior to their retirement..
Defined contribution plan. Under this plan, the employer’s entire obligation is complete once it has made a contribution payment into the plan, as long as no associated costs are being deferred for recognition in later periods. Thus, the employer commits to pay a specific amount of funds into a plan, but does not commit to the amount of benefits subsequently distributed by that plan.

	Beck Inc	Bryant Inc
Sales	$ 315,300.00	$ 1,027,000.00
Variable cost	$ 126,500.00	$ 616,200.00
Contribution margin	$ 188,800.00	$ 410,800.00
Fixed Costs	$ 129,800.00	$ 252,800.00
Net Income	$ 59,000.00	$ 158,000.00
Degree of Operating Leverage	3.2	2.6

Degree of Operating Leverage = Contribution Margin / Net Income

Degree of operating leverage = % change in EBIT / % changes in sales

If Degree of operating leverage is 3.2 and change in sales is 10% then change in net income will be (10% x 3.2)= 32% in case of Beck inc and (2.6 x 10%) = 26% in case of Bryant inc.

	Dollars	Percentage
Beck Inc	$ 77,880.00	32%
Bryant inc	$ 199,080.00	26%

3.ANSWER TO THE PROBLEM IS - Differense in cost which results from selecting one alternative instead of another ( Option D)

Pls read below for understanding the snips :

Snip 1: Solved as per the question and the comments to the respective cells have been taken from the question for your understanding as to why it has been done like that.

Snip 2: I copied and pasted the answer from the excel sheet I worked on so that you can simply copy and paste the same to your excel.

Snip 3: This is the snip that shows the formulas that have been used in excel. This is for your understanding.

Part (a) What is the date that Excel shows for the row whose count is 100? (Copy and paste the content of that cell into the answer box below.

Count	Date	Interest this period	Total (CAD $)
100	24-Sep-41	244,217	5,128,549

See snip 2 for detailed calculations

Part (b) What is the interest earned for the period with count 72?

Count	Date	Interest this period	Total (CAD $)
72	26-Sep-34	62,298	1,308,260

See snip 2 for detailed calculations

Snip 1: Solved as per the question and the comments to the respective cells have been taken from the question for your understanding as to why it has been done like that.

Snip 2: I copied and pasted the answer from the excel sheet I worked on so that you can simply copy and paste the same to your excel.

Rate	Timestep in years
20%	0.25	(entered as =1/4)

Count	Date	Interest this period	Total (CAD $)
0	30-Sep-16	-	39,000
1	30-Dec-16	1,950	40,950
2	31-Mar-17	2,048	42,998
3	30-Jun-17	2,150	45,147
4	30-Sep-17	2,257	47,405
5	30-Dec-17	2,370	49,775
6	31-Mar-18	2,489	52,264
7	30-Jun-18	2,613	54,877
8	30-Sep-18	2,744	57,621
9	30-Dec-18	2,881	60,502
10	31-Mar-19	3,025	63,527
11	30-Jun-19	3,176	66,703
12	30-Sep-19	3,335	70,038
13	30-Dec-19	3,502	73,540
14	30-Mar-20	3,677	77,217
15	29-Jun-20	3,861	81,078
16	29-Sep-20	4,054	85,132
17	29-Dec-20	4,257	89,389
18	30-Mar-21	4,469	93,858
19	29-Jun-21	4,693	98,551
20	29-Sep-21	4,928	103,479
21	29-Dec-21	5,174	108,653
22	30-Mar-22	5,433	114,085
23	29-Jun-22	5,704	119,789
24	29-Sep-22	5,989	125,779
25	29-Dec-22	6,289	132,068
26	30-Mar-23	6,603	138,671
27	29-Jun-23	6,934	145,605
28	29-Sep-23	7,280	152,885
29	29-Dec-23	7,644	160,529
30	29-Mar-24	8,026	168,556
31	28-Jun-24	8,428	176,984
32	28-Sep-24	8,849	185,833
33	28-Dec-24	9,292	195,124
34	29-Mar-25	9,756	204,881
35	28-Jun-25	10,244	215,125
36	28-Sep-25	10,756	225,881
37	28-Dec-25	11,294	237,175
38	29-Mar-26	11,859	249,034
39	28-Jun-26	12,452	261,485
40	28-Sep-26	13,074	274,560
41	28-Dec-26	13,728	288,288
42	29-Mar-27	14,414	302,702
43	28-Jun-27	15,135	317,837
44	28-Sep-27	15,892	333,729
45	28-Dec-27	16,686	350,415
46	28-Mar-28	17,521	367,936
47	27-Jun-28	18,397	386,333
48	27-Sep-28	19,317	405,650
49	27-Dec-28	20,282	425,932
50	28-Mar-29	21,297	447,229
51	27-Jun-29	22,361	469,590
52	27-Sep-29	23,480	493,070
53	27-Dec-29	24,653	517,723
54	28-Mar-30	25,886	543,609
55	27-Jun-30	27,180	570,790
56	27-Sep-30	28,539	599,329
57	27-Dec-30	29,966	629,296
58	28-Mar-31	31,465	660,760
59	27-Jun-31	33,038	693,798
60	27-Sep-31	34,690	728,488
61	27-Dec-31	36,424	764,913
62	27-Mar-32	38,246	803,158
63	26-Jun-32	40,158	843,316
64	26-Sep-32	42,166	885,482
65	26-Dec-32	44,274	929,756
66	27-Mar-33	46,488	976,244
67	26-Jun-33	48,812	1,025,056
68	26-Sep-33	51,253	1,076,309
69	26-Dec-33	53,815	1,130,124
70	27-Mar-34	56,506	1,186,631
71	26-Jun-34	59,332	1,245,962
72	26-Sep-34	62,298	1,308,260
73	26-Dec-34	65,413	1,373,673
74	27-Mar-35	68,684	1,442,357
75	26-Jun-35	72,118	1,514,475
76	26-Sep-35	75,724	1,590,198
77	26-Dec-35	79,510	1,669,708
78	26-Mar-36	83,485	1,753,194
79	25-Jun-36	87,660	1,840,854
80	25-Sep-36	92,043	1,932,896
81	25-Dec-36	96,645	2,029,541
82	26-Mar-37	101,477	2,131,018
83	25-Jun-37	106,551	2,237,569
84	25-Sep-37	111,878	2,349,447
85	25-Dec-37	117,472	2,466,920
86	26-Mar-38	123,346	2,590,266
87	25-Jun-38	129,513	2,719,779
88	25-Sep-38	135,989	2,855,768
89	25-Dec-38	142,788	2,998,556
90	26-Mar-39	149,928	3,148,484
91	25-Jun-39	157,424	3,305,908
92	25-Sep-39	165,295	3,471,204
93	25-Dec-39	173,560	3,644,764
94	25-Mar-40	182,238	3,827,002
95	24-Jun-40	191,350	4,018,352
96	24-Sep-40	200,918	4,219,270
97	24-Dec-40	210,964	4,430,234
98	25-Mar-41	221,512	4,651,745
99	24-Jun-41	232,587	4,884,332
100	24-Sep-41	244,217	5,128,549

Snip 3: This is the snip that shows the formulas that have been used in excel. This is for your understanding.

please see the attached file.

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