Question

CLICUULALIUM.CUI NOWcom er 18: Homework Help HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (10,5ee units at $225 each) Variable costs (10,5ee units at $180 each) Contribution margin Fixed costs Pretax income $2.362. See 1,890, eee $ 472,500 315, eee $ 157,500 1. Compute the company's degree of operating leverage for 2019. 2. If sales decrease by 4% in 2020, what will be the company's pretax income? 3. Assume sales for 2020 decrease by 4%. Prepare a contribution margin income statement for 2020. nces Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume sales for 2020 decrease by 4%. Prepare a contribution margin income statement for 2020. HUDSON CO. Carand condition < Prev 10 of 10 !! Next > A.

Answer 1

1.

Degree of Operating Leverage for 2019 =

Contribution ÷ Pretax income

= $472,500 ÷ $157,500

= 3 times.

2.

If sales is decreased by 4% in 2020,

If sales is decreased by 4%, Contribution Margin also decreases by 4%.

:. Contribution margin will be : 472,500 - 4%

= $453,600

Given, fixed cost = $315,000

:. Pretax income = Contribution Margin - Fixed Cost

= $453,600 - $315,000

= $138,600

3.

HUDSON CO.

Forecasted Contribution Margin Income Statement

For year ended December 31,2020

Sales ($2,362,500 - 4%)	$2,268,000
Less: Variable Cost(1,890,000- 4%)	(1,814,400)
Contribution Margin	$453,600
Less : Fixed Cost	(315,000)
Income (Pretax)	$138,600