Homework Sourse1 150 points MC Qu 63 The following income statements are pr
1. 1.50 points MC Qu. 63 The following income statements are provided... The following income statements are provided for Li Company\'s last two years of operation 2011 2012 Number of units produced and sold Sales revenue Cost of 4,000 60,000 39.200) 3,500 52,500 sold Gross mar General, se 20,800 1,500 7.300 Net income $9,300 $6,800 Assuming that cost behavior did not change over the two year period, what is Li Company\'s contribution margin in 20127 O $17,500 O $38.500 O $21000 $17,000 
Solution
63) Contribution Margin in 2012 $ 17,500 Working: a. Variable costs of goods sold per unit = Change in costs of goods sold/Change in unit sold = (39200-35200)/(4000-3500) = $ 8.00 b. Variable general, selling and administrative expense = Change in costs of goods sold/Change in unit sold = (11500-10500)/(4000-3500) = $ 2.00 c. 2011 2012 Units sold 4,000 3,500 Costs of goods sold $ 39,200 $ 35,200 Variable cost of goods sold $ 32,000 $ 28,000 (4000*$8.00) (3500*$8.00) Fixed Costs $ 7,200 $ 7,200 d. 2011 2012 Units sold 4,000 3,500 General, Selling and administraive expense $ 11,500 $ 10,500 Variable cost of goods sold $ 8,000 $ 7,000 (4000*$2.00) (3500*$2.00) Fixed Costs $ 3,500 $ 3,500 e. Now, in 2012 Contribution Margin Income Statement: Per Unit Total Sales Revenue $ 15.00 $ 52,500 Variable costs: Costs of goods sold $ 8.00 $ 28,000 General, Selling and adminisrative expense $ 2.00 $ 7,000 Contribution Margin $ 17,500 Fixed Costs: Costs of goods sold $ 7,200 General, Selling and adminisrative expense $ 3,500 Net Income $ 6,800 64) Operating Leverage 1.38 Working: a. Sales Revenue $ 29,260 Variable costs $ 14,060 Contribution Margin $ 15,200 Fixed Costs $ 4,200 Net Income $ 11,000 b. Opearating Leverage = Contribution Margin / Net Income = $ 15,200 / $ 11,000 = 1.38