Revenues.....................................................$160,000 Cost of Go

Question

Revenues.....................................................$160,000
Cost of Goods sold($16,000+$3.20/unit)..................$80,000
Gross Profit...................................................$80,000
Operating expenses
Selling ($4,500+$1.40/unit)..............................$32,500
Administration($7,500+$1.00/unit).....................$27,500
Operating Income...........................................$20,000

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.) 25,000 units

       2.) 11,000 units

D.) Refer to your answer in part a when total revenues were $160,000. Calculate the firm's operating expenses (or loss) if the unit selling price and variable expenses do not change, and total revenues

       1.) Increase by $11,000

       2.) Decrease by $12,000

Explanation / Answer

A-C were answered in another question. D) 11,000/8= 1,375 units So Profits increase (8-3.20-1.40-1)=2.40*1375= 3,300 -12,000 is 1,500 units So profits decrease by (8-3.20-1.40-1)*1500= 3,600 Revenues of $8 per unit were derived thusly COGS (80,000-16,000)/3.20= 20,000 units So 160,000/20,000 units is $8 per unit.

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