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Shown here is an income statement in the traditional format for a firm with a sales volume of...

Question:

Shown here is an income statement in the traditional format for a firm with a sales volume of 20,000 units. Cost formulas also are shown:

Revenues $200,000
Cost of goods sold ($36,000 + $5.20/unit) 140,000
Gross profit $60,000
Operating expenses:
Selling ($9,200 + $0.30/unit) 15,200
Administration ($18,800 + $0.50/unit) 28,800
Operating income $16,000

a. Prepare an income statement in the contribution margin format.

b. Calculate the contribution margin per unit and the contribution margin ratio.

Contribution Margin:

The contribution margin can be calculated for single unit of a product or in terms of total cost. It is the value received after deducting variable cost of the product from its selling price.

Answer and Explanation: 1

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a.

ParticularsAmountCalculation
Revenue (A)200,00020,000 * 10
Variable expenses:
Cost of goods sold104,00020,000 * 5.20
Add: Selling...

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Contribution Margin: Definition & Formula

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Chapter 22 / Lesson 20
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Understand what the contribution margin is. Learn the definition of contribution margin and understand its importance in business. Discover how to calculate it through examples.


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