Assume that more than one product is being sold in each of the four following case situations: Case #1 Case #2 Case #3 Case #4 Sales $ 443,000 $ 203,000 $ 292,000 Variable expenses 140,070 84,680 Fixed expenses 52,000 470,000 Net operating income (loss) $ 82,350 2$ 10,930 2$ 90,000 $ (18,680) Contribution margin ratio (percent) 45 % % 80 % %

Assume that more than one product is being sold in each of the four following case situations: Case #1 Case #2 Case #3 Case #4 Sales $ 443,000 $ 203,000 $ 292,000 Variable expenses 140,070 84,680 Fixed expenses 52,000 470,000 Net operating income (loss) $ 82,350 2$ 10,930 2$ 90,000 $ (18,680) Contribution margin ratio (percent) 45 % % 80 % %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 12-21 (Algo) Prepare a contribution margin format income statement; answer what-if questions LO 12-7, 12-8, 12-9 Shown here is an income statement in the traditional format for a firm with a sales volume of 7,500 units. Cost formulas also are shown: Revenues Cost of goods sold ($5,900 + $2.25/unit) Gross profit Operating expenses: Selling ($1,200 + $0.10/unit) Administrative ($3,500 + $0.20/unit) Operating income $34,400 22,775 $ 11,625 1,950 5,000 $ 4,675 Required: a. Prepare an income statement in the contribution margin format. b. Calculate the contribution margin per unit and the contribution margin ratio. c. Calculate the firm's operating income (or loss) if the volume changed from 7,500 units to 1. 11,250 units. 2. 3,750 units. d. Refer to your answer to part a for total revenues of $34,400. Calculate the firm's operating income (or loss) if unit selling price and variable expenses per unit do not change and total revenues 1. Increase by $14,500. 2. Decrease by $3,000.
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