Question

Countrywide Travel uses the contribution margin income statement internally. Countrywide's first quarter results are as follows: (Click the icon to view the income statement.) Countrywide's relevant range is sales of between $140,000 and $690,000 Read the requirements

Answer 1

Contribution margin ratio = $340,000/$425,000 = 80% Variable costs = 100%-80% = 20%

Α 1 Sales level of $170,000: Countrywide Travel 3 Contribution margin income statement 4 Three month ended March 31 5 Sales revenue $ 170,000 6 Less: Variable costs (20%) $ 34,000 7 Contribution margin $ 136,000 8 Less: Fixed expenses $ 170,000 9 Operating income (Loss) $ 34,000) 11 Sales level of $400,000: 12 Countrywide Travel 13 Contribution margin income statement 14 Three month ended March 31 15 Sales revenue $ 400,000 16 Less: Variable costs (20%) $ 80,000 17 Contribution margin $ 320,000 18 Less: Fixed expenses $ 170,000 19 Operating income (Loss) $ 150,000

1 Sales level of $170,000: 2 Countrywide Travel 3 Contribution margin income statement 4 Three month ended March 31 5 Sales revenue 170000 6 Less: Variable costs (20%) =+B5*20% 7 Contribution margin =+B5-B6 8 Less: Fixed expenses 170000 9 Operating income (Loss) |=+B7-18 10 11 Sales level of $400,000: 12 Countrywide Travel 13 Contribution margin income statement 14 Three month ended March 31 15 Sales revenue 400000 16 Less: Variable costs (20%) =+B15*20% 17 Contribution margin =+B15-B16 18 Less: Fixed expenses 170000 19 Operating income (Loss) =+B17-B18 20

(Fixed expenses +0 )/Contribution margin ratio = Breakeven sales in dollars $170,000/80% = $212,500 The breakeven sales in dollars is $212,500.