Question

Global Travel uses the contribution margin income statement internally. Global's first-quarter results are as follows:

Answer 1

Answer:

Contribution margin ratio = Contribution Margin / Sales

= $ 315,000 / $ 525,000

= 0.6 or 60%

Hence, contribution margin at $ 230,000  Sales = Contribution margin ratio * $ 230,000 ( Sales )

= 0.6 * 230,000 = $ 138,000 ( Part A )

Contribution margin at $ 400,000 Sales = 0.6 * $ 400,000

= $ 240,000 ( Part B )

At Sales level of $ 230,000

Sales revenue                                                             $ 230,000

- Variable expenses (Sales - Contribution margin)   $    92,000

Contribution Margin ( From Part A )                           $ 138,000                      

- Fixed Expenses                                                         $ 172,000

Operating Income / Loss                                            $ (34,000)

At Sales level of $ 400,000

Sales Revenue                                                            $ 400,000

- Variable expenses                                                    $ 160,000

Contribution Margin ( From part B )                           $ 240,000

- Fixed Expenses                                                         $ 172,000

Operating Income / Loss                                             $  68,000

                           

Explanation:

Refer to the answer.