Preparing contribution margin income statements and calculating breakeven sales
For its top managers, Worldwide Travel formats its income statement as follows:
|
WORLDWIDE TRAVEL Contribution Margin Income Statement Three Months Ended March 31, 2012 |
|
|
Sales revenue |
$ 317,500 |
|
Variable costs |
95,250 |
|
Contribution margin |
$ 222,250 |
|
Fixed costs |
175,000 |
|
Operating income |
$ 47,250 |
Worldwide’s relevant range is between sales of $245,000 and $364,000.
Requirements
1. Calculate the contribution margin ratio.
2. Prepare two contribution margin income statements: one at the $245,000 leveland one at the $364,000 level.
3. Compute breakeven sales in dollars.