Shown here is an income statement in the traditional format for a firm with a sa
ID: 2348127 • Letter: S
Question
Shown here is an income statement in the traditional format for a firm with a sales volume of 20,000 units:
Prepare an income statement in the contribution margin format. (Omit the "$" sign in your response.)
Calculate the contribution margin per unit and the contribution margin ratio. (Round your answers to 1 decimal place. Omit the "$" and "%" signs in your response.)
Calculate the firm's operating income (or loss) if the volume changed from 20,000 units to 25,000 units. (Input the amount as positive value. Omit the "$" sign in your response.)
Calculate the firm's operating income (or loss) if the volume changed from 20,000 units to 11,000 units. (Input the amount as positive value. Omit the "$" sign in your response.)
Calculate the firm's operating income (or loss) if unit selling price and variable expenses do not change, and total revenues increase by $18,000. (Input the amount as positive value. Omit the "$" sign in your response.)
Calculate the firm's operating income (or loss) if unit selling price and variable expenses do not change, and total revenues decrease by $12,000. (Input the amount as positive value. Omit the "$" sign in your response.)
Revenues $ 160,000 Cost of goods sold ($16,000 + $3.20/unit) 80,000 Gross profit $ 80,000 Operating expenses: Selling ($4,500 + $1.40/unit) 32,500 Administration ($7,500 + $1.00/unit) 27,500 Operating income $ 20,000Explanation / Answer
Requirment 1
$
Revenue 160,000
Less Variable costs
[20000 x (3.2 + 1.4 + 1.0)] (112,000)
Contribution 48,000
Less Fixed Costs
(16000 + 4500 + 7500) (28,000)
Operating Income 20,000
Requirement 2
Contribution margin per unit = 48000/20000 = $2.40
Contribution margin ratio = 48000 / 160000 = 30%
Requirement 3
(a) Volume change to 25,000 units
Operating profit = 25000 x 2.40 - 28000 = $32,000
(b) Volume change to 11,000 units
Operating LOSS = 11000 x 2.40 - 28000 = $1600
Requirement 4
(a)
When total revenue increases $18000, total revenue = 160000 + 18000 = $178,000
Number of units sold = 178000/(160000/20000) = 22250 units
Operating income = 22250 x 2.40 - 28000 = $25,400
(b)
When total revenue decreases $12,000, total revenue = 160000 - 12000 = $148,000
Number of units sold = 148000/8 = 18,500 units
Operating income = 18500 x 2.4 - 28000 = $16,400
Hope this helps!
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.