Required B Assume that more than one product is being sold in each of the four f

Question

Required B

Assume that more than one product is being sold in each of the four following case situations:

Fill in the missing amounts in each of the eight case situations below. Each case is independent of the others. (Hint: One way to find the missing amounts would be to prepare a contribution format income statement for each case, enter the known data, and then compute the missing items.)

Required:

b. Assume that more than one product is being sold in each of the four following case situations:

Explanation / Answer

CASE 1

Contribution margin = 36%

Variable cost = 1- 0.36 = 0.64

Variable cost = $445000 * 0.64 = 284800

Fixed cost = Contribution - Net operating income

= (445000-284800) - 47200

= 113000

CASE 2:

Net Operating Income (Loss) = Sales - variable cost - Fixed cost

= 200000 -140000 - 64000

= (4000)

Contributon margin = contribution /Sales * 100

= (200000 - 140000) / 200000 * 100

= 30 %

Case 3

Contribution = Fixed expenses + Net operating income (loss)

= 470,000 + 98000

= 568000

Contribution margin ratio = Contribution margin / Sales * 100

80 % = 568000 / Sales * 100

Sales = 710000

Variable cost = Sales - Contribution

= 710000 - 568000

= 142000

CASE 4

Contribution margin = Sales - Variable cost

= $299,000 - 98,670

= 200330

Fixed expense = Contribution - Net operating income (Loss)

= 200330 - (24,670)

= 225000

Case #1 Case #2 Case #3 Case #4 Sales $445,000 $200,000 710000 $299,000 Variable expenses 284800 140,000 142000 98,670 Fixed expenses 113000 64,000 470,000 Net operating income (loss) $47,200 (4000) $98,000 $(24,670) Contribution margin ratio (percent) 36 % 30 % 80 % %

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