P7-65A (similar to) Question Help Tuffet Seating Company is currently selling 2,
ID: 2539224 • Letter: P
Question
P7-65A (similar to) Question Help Tuffet Seating Company is currently selling 2,200 oversized bean bag chairs a month at a price of ST5 per chair. The variable cost of each chair sold includes $40 to purchase the bean bag chairs from suppliers and a 59 sales commission. Fixed costs are $9,00 per month. The company is considering making seveal operational changes and wants to know how the change will impact its operating income Read the requirements. Requirement 1. Prepare the company's current contribution margin income statement. (Use parentheses or a minus sign for an operating loss) Tuffet Seating Company Contribution Margin Income Statement Sales revenue Variable expenses. Cost of goods sold Operating expenses Contribution marg Fixed expenses Operating income (loss)Explanation / Answer
Answer
Units
per unit
Amount
Sales Revenue
2200
75
165000
Variable Expenses:
Cost of Goods Sold
2200
40
88000
Operating expenses
2200
9
19800
107800
Contribution margin
2200
26
$57200
Fixed expenses
9000
Operating Income (loss)
$48200
Alternative 1
Units
per unit
Amount
Sales Revenue
[2200+14%] 2508
75
188100
Variable Expenses:
Cost of Goods Sold
2508
40
100320
Operating expenses
2508
[75x15%] 11.25
28215
128535
Contribution margin
2508
23.75
59565
Fixed expenses
9000
Operating Income (loss)
$50565
Current Income (loss)
48200
Increase (decrease) in income
$2365
Alternative 2
Units
per unit
Amount
Sales Revenue
2398 [2200+9%]
75
179850
Variable Expenses:
Cost of Goods Sold
2398
40
95920
Operating expenses
2398
9
21582
117502
Contribution margin
2398
26
62348
Fixed expenses
[9000+1000] 10000
Operating Income (loss)
$52348
Current Income (loss)
48200
Increase (decrease) in income
$4148
Alternative 3
Units
per unit
Amount
Sales Revenue
[2200-15%] 1870
83
155210
Variable Expenses:
Cost of Goods Sold
1870
40
74800
Operating expenses
1870
9
16830
91630
Contribution margin
1870
34
63580
Fixed expenses
9000
Operating Income (loss)
$54580
Current Income (loss)
48200
Increase (decrease) in income
$6380
Alternative 4
Units
per unit
Amount
Sales Revenue
[2200+14%] 2508
[75+14] 89
223212
Variable Expenses:
Cost of Goods Sold
2508
[40+6] 46
115368
Operating expenses
2508
9
22572
137940
Contribution margin
2508
34
85272
Fixed expenses
[9000+4000] 13000
Operating Income (loss)
$72272
Current Income (loss)
48200
Increase (decrease) in income
$24072
Units
per unit
Amount
Sales Revenue
2200
75
165000
Variable Expenses:
Cost of Goods Sold
2200
40
88000
Operating expenses
2200
9
19800
107800
Contribution margin
2200
26
$57200
Fixed expenses
9000
Operating Income (loss)
$48200
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