Question

n November, Townhouse Corporation sold 2,100 units of its only product. Its total sales were $195,300, its total variable costs were $84,000, and its total fixed costs were $98,700. Required: a. Construct the company's contribution format income statement for November in good form. b. Redo the company's contribution format income statement assuming that the company sells 2,300 units.

Answer 1

Answer:

a.

                             Townhouse Corporation

                   Contribution Margin Income statement

                                  for November, xxxx

                                                                    $

Sales                                                         195,300

Variable cost                                            (84,000)

Contribution                                              111,300      

Fixed Cost                                               (98,700)  

Net Income                                                 12,600

b.

                             Townhouse Corporation

                   Contribution Margin Income statement

                                  for November, xxxx

                                                                    $

*Sales                                                         213,900

*Variable cost                                            (92,000)

Contribution                                              121,900

Fixed Cost                                                 (98,700)

Net Income                                                23,200

Explanation:

* Working

b.

Sales and variable cost will vary with the sales volume as below:

Sales price = 195,300 / 2,100 = $93 per unit

Sales = $93 x 2,300 Unit = $213,900

Variable cost per unit = $84,000 / 2,100 = $40 per unit

Total Variable cost = $40 x 2,300 units = $92,000

Fixed cost will not change with the change in sale volume.