Acct 202 Ch 5 Questions

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5-1 Exercise Preparing a Contribution Format Income Statement Wheeler Corporation's most recent income statement follows: Total Sales (8,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Required: $208,000 144,000 $64,000 56,000 $8,000 Per Unit $26.00 18.00 $8.00 Prepare a new contribution format income statement under each of the following conditions (consider each case independently): 1. The sales volume increases by 50 units. The new income statement would be: Total Sales (8050 units) Variable expenses Contribution margin Fixed expenses Net Operating Income $209,300 144,900 $64,400 56,000 $8,400 Per unit $26.00 18.00 $8.00 As an alternative, you could have found the net income using the following method: Original net operating income Change in contribution margin (50 units * $8.00 per unit) New net operating income $8,000 400 $8,400 2. The sales volume declines by 50 units. Sales (7950 units) Variable expenses Contribution margin Fixed expenses Net Operating Income $206,700 143,100 $63,600 56,000 $7,600 $26.00 18.00 $8.00 As an alternative, you could have found the net income using the following method: Original net operating income Change in contribution margin (-50 units * $8.00 per unit) New net operating income 3. The sales volume is 7,0000. $8,000 -400 $7,600 Sales (7000 units) Variable expenses Contribution margin Fixed expenses Net Operating Income $182,000 126,000 $56,000 56,000 $0 $26.00 18.00 $8.00 This is the company's break even point because it it the point where the contribution margin covers the fixed expenses and there is no net income/net loss (it is zero). Exercise 5-4 Computing and Using the CM Ratio Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and total fized expenses were $45,000. Required: 1. What is the company's

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