WORLDWIDE TRAVEL Contribution Margin Income Statement Three Months Ended March 31, 2018 Net Sales Revenue $ 316,500 Variable Costs 136,095 Contribution Margin 180,405 Fixed Costs 173,000 Operating Income $ 7,405
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.
Calculating contribution margin ratio, preparing contribution margin income statements
For its top managers, Worldwide Travel Formats its income statement as follows:
Worldwide’s relevant range is between sales of $253,000 and $368,000.
Requirements
- Calculate the contribution margin ratio.
- Prepare two contribution margin income statements: one at the $253,000 sales level and one at the $368,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.)
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