
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%.

Want to see the full answer?
Check out a sample textbook solution
Chapter 21 Solutions
Connect Access Card for Fundamental Accounting Principles
- no aiOne company might depreciate a new computer over three years while another company might depreciate the same model computer over five years...and both companies are right. True Falsearrow_forwardno ai An asset's useful life is the same as its physical life? True Falsearrow_forwardno ai Depreciation Expense reflects an allocation of an asset's original cost rather than an allocation based on the economic value that is being consumed. True Falsearrow_forward
- The purpose of depreciation is to have the balance sheet report the current value of an asset. True Falsearrow_forwardDepreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True Falsearrow_forwardDont use AI Give soln.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





