Hudson Co, reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,600 units at $225 each) Variable costs (9,600 units at $180 each) Contribution margin Fixed costs $2,160,000 1,728,000 $432,000 324,000 $ 108,000 Pretax income 1. Compute the company's degree of operating leverage for 2019. 2. If sales decrease by 5% in 2020, what will be the company's pretax income? 3. Assume sales for 2020 decrease by 5%. Prepare a contribution margin income statement for 2020. Complete this question by entering your answers in the tabs below.

Hudson Co, reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,600 units at $225 each) Variable costs (9,600 units at $180 each) Contribution margin Fixed costs $2,160,000 1,728,000 $432,000 324,000 $ 108,000 Pretax income 1. Compute the company's degree of operating leverage for 2019. 2. If sales decrease by 5% in 2020, what will be the company's pretax income? 3. Assume sales for 2020 decrease by 5%. Prepare a contribution margin income statement for 2020. Complete this question by entering your answers in the tabs below.

Name: Hudson Co. reports the contribution margin income statement for 2019.
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Description: Hudson Co. reports the contribution margin income statement for 2019.**HUDSON CO.****Contribution Margin Income Statement***For Year Ended December 31, 2019*- **Sales (9,600 units at $225 each):** $2,160,000- **Variable costs (9,600 units at $180 ea

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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Question

Hudson Co. reports the contribution margin income statement for 2019.

**HUDSON CO.**
**Contribution Margin Income Statement**
*For Year Ended December 31, 2019*

- **Sales (9,600 units at $225 each):** $2,160,000
- **Variable costs (9,600 units at $180 each):** $1,728,000
- **Contribution margin:** $432,000
- **Fixed costs:** $324,000
- **Pretax income:** $108,000

**Tasks:**

1. **Compute the company’s degree of operating leverage for 2019.**

2. **If sales decrease by 5% in 2020, what will be the company’s pretax income?**

3. **Assume sales for 2020 decrease by 5%. Prepare a contribution margin income statement for 2020.**

**Responses:**

- **Degree of operating leverage for 2019:** 3.0

### Explanation:

The image is a screenshot of an interactive exercise from a financial education website, focusing on operating leverage and contribution margin analysis. It presents key figures from the 2019 financial statement and requires computations based on potential changes in sales.

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Required information [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2019. HUDSON Co. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (10,600 units at $300 each) Variable costs (10,600 units at $240 each) Contribution margin $3,180,000 2,544,000 636,000 480,000 Fixed costs Pretax income 156,000 1. Assume Hudson Co. has a target pretax income of $172,000 for 2020. What amount of sales (in dollars) is needed to produce this target income? 2. If Hudson achieves its target pretax income for 2020, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.) 1. Amount of sales 2. Margin of safety
Compute the Productivity Component indicate if favorable/(unfavorable).
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Selling price per unit -$17; Selling & administrative (fixed expense)- $130 000; Interest expense (fixed expense)- $10 000; COGS (variable expense) - $4; Selling or administrative (variable expense)- $3; What is the company's contribution margin?