Problem:
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
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Sales revenue
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$ 317,500
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Variable costs
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95,250
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Contribution margin
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$ 222,250
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Fixed costs
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175,000
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Operating income
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$ 47,250
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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.