Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement. For Year Ended December 31 Sales (10,000 units at $225 each) Variable costs (10,000 units at $180 each) Contribution margin Fixed costs Income $ 2,250,000 1,800,000 $ 450,000 360,000 $ 90,000 1. Compute the company's degree of operating leverage. 2. If sales decrease by 5% in the next year, what will be the company's income? 3. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%.
Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement. For Year Ended December 31 Sales (10,000 units at $225 each) Variable costs (10,000 units at $180 each) Contribution margin Fixed costs Income $ 2,250,000 1,800,000 $ 450,000 360,000 $ 90,000 1. Compute the company's degree of operating leverage. 2. If sales decrease by 5% in the next year, what will be the company's income? 3. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Hudson Company reports the following contribution margin income statement.
HUDSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31
Sales (10,000 units at $225 each)
Variable costs (10,000 units at $180 each)
Contribution margin
Fixed costs
Income
$ 2,250,000
1,800,000
$ 450,000
360,000
$ 90,000
1. Compute the company's degree of operating leverage.
2. If sales decrease by 5% in the next year, what will be the company's income?
3. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%.
Complete this question by entering your answers in the tabs below.
Required 1 Rired 2 Required 3
Compute the company's degree of operating leverage. (Round your answer to 1 decimal place.)
Degree of operating leverage
Required 1
Required 2 >
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