Prepare a contribution margin format income statement; answer what-if questions Shown here is an income statement in the traditional format for a firm with a sales volume of 20,000 units. Cost formulas also are shown:

 

 

 

 

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$200,000
Cost of goods sold ($36,000 1 $5.20/unit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	140,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses:	$ 60,000
Selling ($9,200 1 $0.30/unit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15,200
Administration ($18,800 1 $0.50/unit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28,800
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 16,000

 

 

Required:

a.       Prepare an income statement in the contribution margin format.

b.      Calculate the contribution margin per unit and the contribution margin ratio.

c.       Calculate the firm’s operating income (or loss) if the volume changed from 20,000 units to

1.    28,000 units.

2.    12,000 units.

d.      Refer to your answer to part a for total revenues of $200,000. Calculate the firm’s operating income (or loss) if unit selling price and variable expenses per unit do not change and total revenues

1.      Increase $60,000.

2.      Decrease $52,000.