Preparing contribution margin income statements and calculating breakeven sales For its top managers, Worldwide Travel formats its income statement as follows:
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WORLDWIDE TRAVEL Contribution Margin Income Statement Three Months Ended March 31, 2012 |
|
|
Sales revenue |
$ 317,500 |
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Variable costs |
95,250 |
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Contribution margin |
$222,250 |
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Fixed costs Operating income |
175,000 |
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|
$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 level and one at the $364,000 level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.)
3. Compute breakeven sales in dollars.