Question - Cost - Volume - Profit Analysis
Prepare Contribution margin income statements.
Western Travel uses the contribution margin income statement internally. Western's first-quarter results are as follows:
Western Travel Contribution Margin Income Statement Three months Ended March 31
Sales Revenue.................................................. $500,000
Less Variable expenses................................... $100,000
Contribution margin....................................... $400,000
Less: Fixed expenses...................................... $174,000
Operating income........................................... $226,000
Western's relevant range is sales of between $100,000 and $700,000.
Requirements:
1. Prepare contribution margin income statements at sales level of $255,000 and $363,000. (Hint: Use the contribution margin Ratio.)
2. Compute breakeven sales in dollars.