Shown here is an income statement in the traditional format for a firm with a sa

Question

Shown here is an income statement in the traditional format for a firm with a sales volume of 20,000 units: Revenues $160,000 Cost of goods sold ($10,50065,500 $2.75/unit) Gross proft $94,500 Operating expenses Selling ($2,150 17.15 +$0.75/unit) Administration ($4,550+ $0.40unit)_ Operating$64,800 income 12,550 Required a. Prepare an income statement in the contribution margin format. Variable b. Calculate the contribution margin per unit and the contribution margin ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Contribut unit c-1. Calculate the firm's operating income (or loss) if the volume changed from 20,000 units to 25,000 units. (Do not round intermediate calculations.) c-2. Calculate the firm's operating income (or loss) if the volume changed from 20,000 units to 12,000 units. (Do not round intermediate calculations.) Refer to your answer to part a when total revenues were $160,000. d-1. Calculate the firm's operating income (or loss) if unit selling price and variable expense per unit do not change and total revenues increase by $14,000. (Do not round intermediate calculations.) d-2. Calculate the firm's operating income (or loss) if unit selling price and variable expense per unit do not change and total revenues decrease by $9,500. (Do not round intermediate calculations.)

Explanation / Answer

Answers

Units

per unit ($)

Amount ($)

Sales

20000

8

160000

Less: Variable Costs

Cost of Goods Sold

20000

2.75

55000

Selling

20000

0.75

15000

Administrative

20000

0.4

8000

Contribution margin

20000

4.1

$82000

Less: Fixed Cost

Cost of Goods Sold

10500

Selling

2150

Administrative

4550

Net operating Income

$64800

On the basis of data calculated above, following answer are provided:

Contribution per unit = $4.1

Contribution margin ratio = $4.1/$8 = 51.25%

C1

Units

per unit ($)

Amount ($)

Sales

25000

8

200000

Less: Variable Costs

Cost of Goods Sold

25000

2.75

68750

Selling

25000

0.75

18750

Administrative

25000

0.4

10000

Contribution margin

25000

4.1

102500

Less: Fixed Cost

Cost of Goods Sold

10500

Selling

2150

Administrative

4550

Net operating Income

85300

C2

Units

per unit ($)

Amount ($)

Sales

12000

8

96000

Less: Variable Costs

Cost of Goods Sold

12000

2.75

33000

Selling

12000

0.75

9000

Administrative

12000

0.4

4800

Contribution margin

12000

4.1

49200

Less: Fixed Cost

Cost of Goods Sold

10500

Selling

2150

Administrative

4550

Net operating Income

32000

D1

D2

Change In Revenues – Increase (Decrease)

14000

(9500)

Contribution margin per unit

4.1

4.1

Sale price per unit

8

8

Contribution margin ratio

51.25%

51.25%

Change in operating Income

$7175

$(4868.75)

D1: Old Operating Income $64,800 + Change in Operating income $7175 = $71,795 = Firm's operating Income

D2: Old operating income $64,800 + Change in operating Income $(4868.75) = $59,931.25 = Firm's operating income.

Units

per unit ($)

Amount ($)

Sales

20000

8

160000

Less: Variable Costs

Cost of Goods Sold

20000

2.75

55000

Selling

20000

0.75

15000

Administrative

20000

0.4

8000

Contribution margin

20000

4.1

$82000

Less: Fixed Cost

Cost of Goods Sold

10500

Selling

2150

Administrative

4550

Net operating Income

$64800

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