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Sales Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Variable costs: Manufacturing expense Selling expense Administrative expense Contribution margin Fixed costs: Manufacturing expense Selling expense Administrative expense Operating income Income Statement - Biblio Files Sales Variable costs: Manufacturing expense Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Selling expense Administrative expense Contribution margin Fixed costs: Manufacturing expense Selling expense ompany Administrative expense Operating income $254,400 21,200 63,600 $5,000 4,000 12,200 $169,600 16,960 67,840 $88,000 8,000 10,000 $424,000 (339,200) $84,800 (21,200) $63,600 $424,000 (254,400) $169,600 (106,000) $63,600

Sales Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Variable costs: Manufacturing expense Selling expense Administrative expense Contribution margin Fixed costs: Manufacturing expense Selling expense Administrative expense Operating income Income Statement - Biblio Files Sales Variable costs: Manufacturing expense Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Selling expense Administrative expense Contribution margin Fixed costs: Manufacturing expense Selling expense ompany Administrative expense Operating income $254,400 21,200 63,600 $5,000 4,000 12,200 $169,600 16,960 67,840 $88,000 8,000 10,000 $424,000 (339,200) $84,800 (21,200) $63,600 $424,000 (254,400) $169,600 (106,000) $63,600

FINANCIAL ACCOUNTING
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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Contribution Margin

Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete the following table from the data provided on the income statements. Each company sold 84,800 units during the year.

  Cover-to-Cover
Company		 Biblio Files
Company
Contribution margin ratio (percent) 20 40
Unit contribution margin 1 2
Break-even sales (units) 21,200 127,200
Break-even sales (dollars) 106,000 636,000
**Cover-to-Cover Company** **Contribution Margin Income Statement** **For the Year Ended December 31, 20Y8** - **Sales:** $424,000 - **Variable Costs:** - Manufacturing Expense: $254,400 - Selling Expense: $21,200 - Administrative Expense: $63,600 Total Variable Costs: $(339,200) - **Contribution Margin:** $84,800 - **Fixed Costs:** - Manufacturing Expense: $5,000 - Selling Expense: $4,000 - Administrative Expense: $12,200 Total Fixed Costs: $(21,200) - **Operating Income:** $63,600 --- **Biblio Files Company** **Contribution Margin Income Statement** **For the Year Ended December 31, 20Y8** - **Sales:** $424,000 - **Variable Costs:** - Manufacturing Expense: $169,600 - Selling Expense: $16,960 - Administrative Expense: $67,840 Total Variable Costs: $(254,400) - **Contribution Margin:** $169,600 - **Fixed Costs:** - Manufacturing Expense: $88,000 - Selling Expense: $8,000 - Administrative Expense: $10,000 Total Fixed Costs: $(106,000) - **Operating Income:** $63,600 **Explanation of Income Statements:** Both the Cover-to-Cover Company and Biblio Files Company have the same total sales of $424,000. The income statements are broken down into variable costs and fixed costs. Variable costs include manufacturing, selling, and administrative expenses that vary with the level of production. Fixed costs include expenses that remain constant regardless of production levels. - The Contribution Margin is calculated as Sales minus Total Variable Costs. - Operating Income is derived from the Contribution Margin minus Total Fixed Costs. In both income statements, despite different allocation in costs, the Operating Income remains the same at $63,600. This reflects differing cost structures while maintaining profitability.
Transcribed Image Text:**Cover-to-Cover Company** **Contribution Margin Income Statement** **For the Year Ended December 31, 20Y8** - **Sales:** $424,000 - **Variable Costs:** - Manufacturing Expense: $254,400 - Selling Expense: $21,200 - Administrative Expense: $63,600 Total Variable Costs: $(339,200) - **Contribution Margin:** $84,800 - **Fixed Costs:** - Manufacturing Expense: $5,000 - Selling Expense: $4,000 - Administrative Expense: $12,200 Total Fixed Costs: $(21,200) - **Operating Income:** $63,600 --- **Biblio Files Company** **Contribution Margin Income Statement** **For the Year Ended December 31, 20Y8** - **Sales:** $424,000 - **Variable Costs:** - Manufacturing Expense: $169,600 - Selling Expense: $16,960 - Administrative Expense: $67,840 Total Variable Costs: $(254,400) - **Contribution Margin:** $169,600 - **Fixed Costs:** - Manufacturing Expense: $88,000 - Selling Expense: $8,000 - Administrative Expense: $10,000 Total Fixed Costs: $(106,000) - **Operating Income:** $63,600 **Explanation of Income Statements:** Both the Cover-to-Cover Company and Biblio Files Company have the same total sales of $424,000. The income statements are broken down into variable costs and fixed costs. Variable costs include manufacturing, selling, and administrative expenses that vary with the level of production. Fixed costs include expenses that remain constant regardless of production levels. - The Contribution Margin is calculated as Sales minus Total Variable Costs. - Operating Income is derived from the Contribution Margin minus Total Fixed Costs. In both income statements, despite different allocation in costs, the Operating Income remains the same at $63,600. This reflects differing cost structures while maintaining profitability.
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