Question

Pluto Travel

Contribution Margin Income Statement

Three Months Ended March 31, 2016

Net Sales Revenue

$318,500

Variable Costs

111,475

Contribution Margin

207,025

Fixed Costs

170,000

Operating Income

$37,025

For its top​ managers, Pluto Travel formats its income statement as​ follows: Pluto's relevant range is between sales of $256,000 and $362,000.

1.	Calculate the contribution margin ratio.
2.	Prepare two contribution margin income​ statements: one at the $256,000 sales level and one at the $362,000 sales level. ​(Hint​: The proportion of each sales dollar that goes toward variable costs is constant within the relevant​ range.)

Answer 1

Page No ① Answer: I The Contribution Margin Ratio - contribution Hangin Ratio : cion Margin Ratio . Contribution dl 207025 318500 = 0.65 = 65% . contribution Margin Ratio = 65% 2, Two contribution margin income statements : one at the $256.000 sales level and one at the $ 362,000 sales levella Sales - $ 256,000 Variable cost = 256000 - (256000X 654.) = 256000 -166400

Pageno =89600 · Sales = $ 362,000 Variable Cost - 362000-(362000 x 654) = 362000 - 205 300 : = 126700 sales 256000 362000 Variable costs 89600 126 400 Contribution Margin 256000-89600 362000-126700 = 166400 = 235,300 Fixed costs 170,000 170,000 operating Incomelnoas) 166 400-170,000 = -3600 235,300-140,000 = 65,300