Question

3. Prepare a contribution margin income statement based on the budgeted figures for next year. In a column next to the income statement, show the percentages based on sales for sales, total variable cost, and total contribution margin. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement. Head-First Company Contribution Margin Income Statement For the Coming Year Percent of Sales

Answer 1

1]	Variable cost ratio = Variable cost per unit/Sales price per unit = 49.60/80 =	62.00%
2]	Contribution margin ratio = (80-49.60)/80 =	38.00%
3]		Total	% of Sales
	Sales [5200*$80]	$        4,16,000	100.00%
	Total Variable cost [5200*$49.60]	$        2,57,920	62.00%
	Total contribution margin	$        1,58,080	38.00%
	Less: Fixed Costs:
	Factory overhead	$           21,000
	Selling and administrative expense	$           30,100
	Total fixed costs	$           51,100
	Operating income	$        1,06,980