Question

Global Travel uses the contribution margin income statement internally. Global's first quarter results are as follows: (Click the icon to view the income statement.) Global's relevant range is sales of between $130,000 and $640,000. Read the requirements Requirement 1. Prepare contribution margin income statements at sales levels of $250,000 and $440,000. (Hint: Use the contribution margin ratio) Begin by preparing the contribution margin income statement at the $250,000 level. (Round the variable expense rate to the nearest whole percent. Enter losses with a minus sign or parentheses.) Global Travel Contribution Margin Income Statement Three Months Ended March 31 Sales revenue

Answer 1

Contribution Margin Income Statement
Fixed costs fo not change within the relevant range
Sales revenue	250,000
Less: Variable expenses	75,000
Contribution Margin	175,000
Less: Fixed Expenses	165,200
Operating Income	9,800
At $440,000 level
Sales revenue	440,000
Less: Variable expenses	132,000
Contribution Margin	308,000
Less: Fixed Expenses	165,200
Operating Income	142,800
(Target Profit+Fixed costs)/Contribution Margin ratio = Break even in sales
(0+165200)/70%
i.e. $236000