Contribution Format Income Statement & CM Ratio
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I need help with the following exercises. Please make sure that the exercise number and subject is included in the excel spreadsheet. Thank you very much.
Exercise 6-1 Preparing a Contribution Format Income Statement
Wheeler Corporation's most recent income statement follows:
Total Per Unit
Sales (8,000 units).................................. $208,000 $26.00
Variable expenses.................................. 144,000 18.00
Contribution margin............................... 64,000 8.00
Fixed expense....................................... 56,000
Net operating income.............................. $8,000
Required:
Prepare a new contribution format income statement under each of the following condition (consider each case independently):
a) The sales volume increases by 50 units.
b) The sales volume declines by 50 units.
c) The Sales Volume is 7,000 units.
6-3 Computing and Using the CM Ratio
Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and total fixed expenses were $45,000.
Required:
What is the company's contribution margin (CM) ration?
Estimate the change in the company's net operating income if it were to increase its total sales by $1,500.
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Solution Summary
This solution assists in preparing a contribution format income statement and computing and using the CM ratio.
Solution Preview
Solution to your two problems is provided in a separate excel file attached. It contains the following parts.
Statement of Income-Original level
Statement of income-Contribution approach
C-3 Computing and using C.M. Ratio
(a) Contribution margin Ratio = Contribution/Sales
(b)Statement showing the change in the company's net operating income if it ...
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