Homework Answers
Answer of Part 1:
Pretax Income = Contribution Margin – Fixed Cost
$214,000 = Contribution Margin - $866,000
Contribution Margin = $214,000 + $866,000
Contribution Margin = $1,080,000
Contribution Margin = Sales – Variable Cost
$1,080,000 = Sales - $720,000
Sales = $1,080,000 + $720,000
Sales = $1,800,000
Answer of Part 2:
No. of Units = Contribution Margin / Contribution Margin per
unit
No. of Units = $1,080,000 / $15
No. of Units = 72,000 units
| Forecasted Contribution Margin Income Statement | |||||
| Units | $ per Unit | Total | |||
| Sales | 220000 | $87 | $1,91,40,000 | ||
| -Variable Cost | 220000 | -$64 | -$1,40,80,000 | ||
| Contribution Margin | 220000 | $23 | $50,60,000 | ||
| -Fixed Cost | -$37,90,000 | ||||
| Pretax Net Income | $12,70,000 | ||||
| Total Expected Dollar sales for next period | |||||
| Sales | $18,00,000 | ||||
| -Variable Cost | -$7,20,000 | ||||
| Contribution Margin | $15 | $10,80,000 | |||
| -Fixed Cost | -$8,66,000 | ||||
| Pretax Net Income | $2,14,000 | ||||
| No. of units expected to be sold next period | |||||
| Numerator | / | Denominator | = | Units | |
| $10,80,000 | / | $15 | = | 72000 | |
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