Shown here is an income statement in the traditional format

Shown here is an income statement in the traditional format for a firm with a sales voltume of 18,500 units Revenues Cost of gods sold(9,500 $2 90kunit) Gross profit $185,000 63.150 $121,850 Operating expenses Selling (52 ,400+$1.20/unit) Administration ($5,000+$0.50unit) 24,600 14 250 Operating income $83,000 Required: a. Prepare an income statement in the contribution margin format 5 185,000 Variable expenses ost of goods sold $ (53.650) 22.200) 9 250) expenses ative expenses Total variable expenses Contribution margin Fixed expenses Cost of goods sold (85,100 99.900 5 (9,500 (5 000 Total fixed expenses Operating income (16.900) S 83,000 b. Calculate the contribution margin per unit and the contribution margin ratio (Do not round intermediate caiculations Round your answers to 2 decimai places.) 54001% c-1. calculate the fim\'s operating income (or loss) if the volume changed from 18.500 units to 23.500 units (Do not round intermediate caiculations.) Dperating income e-2. Caiculate the tem\'s operating income (or loss) if the volume changed from 18.500 units to 10.500 units. (Do not round intermediate calculations.)

Solution

Income Statement in Contribution Margin Format in $ a Revenues 185000 Variable Expenses Cost of Goods Sold ($ 2.90 X 18500) 53650 Selling Expenses ($ 1.20 X 18500) 22200 Admiistrative Expenses ($ 0.50 X 18500) 9250 Total Variable Expenses 85100 Contribution Margin 99900 Fixed Cost Cost of Goods Sold 9500 Selling Expenses 2400 Admiistrative Expenses 5000 Total Fixed Cost 16900 Operating Income 83000 b Revenue for 18500 Unit $ 185000 Sale Price Per Unit (185000/18500)   (A) $ 10 Variable Expeses per Unit Cost of Goods Sold $ 2.90 Selling Expenses $ 1.20 Admiistrative Expenses $ 0.50 Total Variable Cost per Unit (B) $ 4.60 Contribution Margin (A-B) $ 5.40 Contribution Margin Ratio = Contribution Margin/ Sales = $ 5.40/$ 10.00 = 54 % Operating Income if Unit sold is 23500 Units in $ c-1 Revenue = 23500 Units X $ 10 235000 Less : Total Variable Cost (23500 Units X $ 5.40) 126900 Contribution Margin 108100 Less : Total Fixed Cost Cost of Goods Sold 9500 Selling Expenses 2400 Admiistrative Expenses 5000 Total Fixed Cost 16900 Operating Income 91200 c-2 Operating Income if Unit sold is 10500 Units in $ Revenue = 10500 Units X $ 10 105000 Less : Total Variable Cost (10500 Units X $ 5.40) 56700 Contribution Margin 48300 Less : Total Fixed Cost Cost of Goods Sold 9500 Selling Expenses 2400 Admiistrative Expenses 5000 Total Fixed Cost 16900 Operating Income 31400 d-1 Firms Operating Income (or Loss) if Unit Selling Price and Variable Expenses per unit do not Change and and total Revenue is increased by $ 13000 in $ Revenues (185000+13000) 198000 Variable Expenses Cost of Goods Sold ($ 2.90 X 18500) 53650 Selling Expenses ($ 1.20 X 18500) 22200 Admiistrative Expenses ($ 0.50 X 18500) 9250 Total Variable Expenses 85100 Contribution Margin 112900 Fixed Cost Cost of Goods Sold 9500 Selling Expenses 2400 Admiistrative Expenses 5000 Total Fixed Cost 16900 Operating Income 96000 d-1 Firms Operating Income (or Loss) if Unit Selling Price and Variable Expenses per unit do not Change and and total Revenue is decreased by $ 7500 in $ Revenues (185000-7500) 177500 Variable Expenses Cost of Goods Sold ($ 2.90 X 18500) 53650 Selling Expenses ($ 1.20 X 18500) 22200 Admiistrative Expenses ($ 0.50 X 18500) 9250 Total Variable Expenses 85100 Contribution Margin 92400 Fixed Cost Cost of Goods Sold 9500 Selling Expenses 2400 Admiistrative Expenses 5000 Total Fixed Cost 16900 Operating Income 75500