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# 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 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 ...

#### Solution Summary

This solution assists in preparing a contribution format income statement and computing and using the CM ratio.

\$2.19