Universal Travel Contribution Margin Income Statement Three Months Ended March 3

Question

Universal Travel

Contribution Margin Income Statement

Three Months Ended March 31, 2016

Sales Revenue

$317,500

Variable Costs

95,250

Contribution Margin

222,250

Fixed Costs

172,000

Operating Income

$50,250

For its top managers,

UniversalUniversal

Travel formats its income statement as follows:

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the icon to view the income statement.)

Universal'sUniversal's

relevant range is between sales of

$ 246 comma 000$246,000

and

$ 368 comma 000$368,000.

Requirements

1.

Calculate the contribution margin ratio.

2.

Prepare two contribution margin income statements: one at the

$ 246 comma 000$246,000

sales level and one at the

$ 368 comma 000$368,000

sales level.

(Hint:

The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.)

Requirement 1. Calculate the contribution margin ratio.

Select the labels and enter the amounts to calculate the contribution margin ratio. (Enter the contribution margin ratio as a whole percentage, X%.)

Contribution margin

/

Net sales revenue

=

Contribution margin ratio

$222,250

/

$317,500

=

70

%

Requirement 2. Prepare two contribution margin income statements: one at the

$ 246 comma 000$246,000

sales level and one at the

$ 368 comma 000$368,000

sales level.

(Hint:

The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.)

First prepare the contribution margin income statement at the

$ 246 comma 000$246,000

sales level. (Use a minus sign or parentheses for a loss.)

Universal Travel

Contribution Margin Income Statement

Three Months Ended March 31, 2016

Sales Revenue

$246,000

Variable Costs

73,800

Contribution Margin

172,200

Fixed Costs

172,000

Operating Income (Loss)

$200

Now prepare the contribution margin income statement at the

$ 368 comma 000$368,000

sales level. (Use a minus sign or parentheses for a loss.)

Universal Travel

Contribution Margin Income Statement

Three Months Ended March 31, 2016

Sales Revenue

368000

Variable Costs

Contribution Margin

Fixed Costs

Operating Income (Loss)

1.

Calculate the contribution margin ratio.

2.

Prepare two contribution margin income statements: one at the

$ 246 comma 000$246,000

sales level and one at the

$ 368 comma 000$368,000

sales level.

(Hint:

The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.)

Explanation / Answer

Ans.   Contribution margin ratio is : $222250/317500= 70%

V/P ratio (100-70) = 30%

                                                   Contribution Margin Income Statement

Sales value                                      $246000                     $368000

Less:Variable cost (246000X.30)      $73800                       $110400

                             (368000X.30)

Contribution (Sales-VC)                     $172200                     $257600

Less:Fixed Cost                                  $172000                     $172000

Income/(loss)                                      ($200)                        $85600

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