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    P12.20 contribution margin income statement unit changes

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    Contribution margin format income statement "what-if" questions
    P12.20
    Prepare a traditional income statement and a contribution margin format income statement (and contribution margin ratio) for a firm with a sales volume of 15,000 units:
    Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . $105,000
    Cost of goods sold ($8,000 1 $3.60/unit) . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 62,000
    Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . $ 43,000
    Operating expenses:
    Selling ($1,500 1 $0.80/unit) . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 13,500
    Administration ($4,000 1 $0.50/unit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,500
    Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . $ 18,000

    Calculate the firm's operating income (or loss) if the volume changed from 15,000 units to
    1. 20,000 units.
    2. 10,000 units.

    Refer to the original data when total revenues were $105,000. Calculate the firm's operating income (or loss) if unit selling price and variable expenses do not change and total revenues
    1. Increase by $15,000.
    2. Decrease by $10,000.

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    Solution Summary

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    $2.19

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