Shown here is an income statement in the traditional format for a firm with a sa

Question

Shown here is an income statement in the traditional format for a firm with a sales volume of 7,800 units. Cost formulas also are shown: Revenues Cost of goods sold ($5,600+$2.25/unit) Gross profit Operating expenses $34,500 23,150 $11,350 Selling ($1,190 +$0.10/unit) Administration ($3,900 $0.20/unit) 1,970 5,460 $ 3,920 Operating income Required a. Prepare an income statement in the contribution margin format. Contribution Margin Income Statement Revenue Variable expense Cost of goods sold Selling expenses Administrative expenses Total variable expenses Contribution margin Fixed expenses Cost of goods sold Selling expenses Administrative expenses Total fixed expenses Operating income

Explanation / Answer

a. Contribution Margin income Statement Revenue 34500 Variable Expenses: Cost of goods sold 17550 Selling expenses 780 Administration expenses 1560 Total variable expenses 19890 Contribution Margin 14610 Fixed expenses: Cost of goods sold 5600 Selling expenses 1190 Administration expenses 3900 Total Fixed Expenses 10690 Operating income 3920 b. Contribution Margin per unit 1.873076923 (14610/7800) Contribution Margin Ratio 42.35% [(14610/34500)*100] c1. Contribution Margin income Statement Revenue 51750 Variable Expenses: Cost of goods sold 26325 Selling expenses 1170 Administration expenses 2340 Total variable expenses 29835 Contribution Margin 21915 Fixed expenses: Cost of goods sold 5600 Selling expenses 1190 Administration expenses 3900 Total Fixed Expenses 10690 Operating income 11225 Revenue = (34500/7800)*11700 c2. Contribution Margin income Statement Revenue 17250 Variable Expenses: Cost of goods sold 8775 Selling expenses 390 Administration expenses 780 Total variable expenses 9945 Contribution Margin 7305 Fixed expenses: Cost of goods sold 5600 Selling expenses 1190 Administration expenses 3900 Total Fixed Expenses 10690 Operating loss -3385 Revenue = (34500/7800)*3900 d1. Contribution Margin income Statement Revenue 45500 Variable Expenses: Cost of goods sold 23145.75 Selling expenses 1028.7 Administration expenses 2057.4 Total variable expenses 26231.85 Contribution Margin 19268.15 Fixed expenses: Cost of goods sold 5600 Selling expenses 1190 Administration expenses 3900 Total Fixed Expenses 10690 Operating income 8578.15 Number of units =45500/(34500/7800) =10287 d2. Contribution Margin income Statement Revenue 31000 Variable Expenses: Cost of goods sold 15770.25 Selling expenses 700.9 Administration expenses 1401.8 Total variable expenses 17872.95 Contribution Margin 13127.05 Fixed expenses: Cost of goods sold 5600 Selling expenses 1190 Administration expenses 3900 Total Fixed Expenses 10690 Operating income 2437.05 Number of units =31000/(34500/7800) =7009

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.