
Concept introduction:
A contribution margin income statement is an income statement in which all variable expenses are subtracted from sales to get contribution margin, and all fixed expenses are then deducted to get net
Contribution margin means sales price less variable costs.
Contribution margin ratio means the difference between a company's sales and variable expenses, put as a in percentage terms.
The contribution margin ratio is a formula that calculates the percentage of contribution margin to net sales.
Operating leverage is the leverage according to which a firm increases its operating revenue by increasing its revenue.
Requirement 1:
To determine:
We have to determine the degree of operating leverage for year 2017.
Requirement 2:
To determine:
We have to determine the pre-tax income if sales decreases by 5% .
Requirement 3:
To determine:
We have to determine the contribution income statement if sales decreases by 5%.

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