Answer:
We prepared a contribution format income statement for each case, entered the known data, and then computed the missing items.
Part a:
Case 1
Units Sold 15000
Sales 180,000/15000 = $ 12
Variable Expenses 120,000/ 15,000 = $ 8
Contribution Margin $4*15000= 60,000
Fixed Expenses 50,000
Net Operating Income Loss <u>$ 10,000</u>
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Case 2
Units Sold 4000
Sales 100,000/4000 = $ 25
Variable Expenses 60,000/ 4,000 = $ 15
Contribution Margin $ 10*4000= 40,000
Fixed Expenses 32,000
<u>Net Operating Income Loss $ 8000</u>
Case 3
Units Sold 10,000
Sales <u>200,000/10,000 = $ 20</u>
Variable Expenses 70,000/ 10,000 = $ 7
Contribution Margin $ 13* 10,000= 130,000
Fixed Expenses <u> </u><u> 118,000</u>
<u>Net Operating Income Loss $ 12,000</u>
Case 4
Units Sold 6,000
Sales 300,000/ 6,000 = $50
Variable Expenses 210,000/ 6000 = $ 35 per unit
Contribution Margin $ 15* 6000= $ 90,000
Fixed Expenses <u> 100,000</u>
<u>Net Operating Income Loss $ (10,000)</u>
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<u>Part b:</u>
Case 1
Sales 500,000
Variable Expenses <u>400,000 </u>
Contribution Margin 20% of 500,000 = $ 100,000
Fixed Expenses 93,000
Net Operating Income Loss $ 7,000
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Case 2
Sales 400,000
Variable Expenses 26<u>0,000 </u>
Contribution Margin 140,000
Fixed Expenses 100,000
Net Operating Income Loss $ 40,000
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Case 3
Sales 250,000
Variable Expenses 1<u>00,000 </u>
Contribution Margin 150,000 ( 60 % of Sales )
Fixed Expenses 130,000
Net Operating Income Loss $ 20,000
Case 4
Sales 600,000
Variable Expenses 42<u>0,000 </u>
Contribution Margin 180,000 (<u> 180,000/600,000 *100 = 30 % )</u>
Fixed Expenses <u>185,000</u>
Net Operating Income Loss $ (5,000)
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