Question

Fill in the missing amounts in each of the eight case situations below. Each case is independent of the others. (Hint: One way to find the missing amounts would be to prepare a contribution format income statement for each case, enter the known data, and then compute the missing items.) Required: Assume that only one product is being sold in each of the four following case situations: Case #2 Case #3 20,000 or Case #1 8,500 $ 221,000 144,500 89,000 Case #4 5,000 130,000 $ 315,000 Unit sold Sales Variable expenses Fixed expenses Net operating income (loss) Contribution margin per unit $ 200,000| 91,000 (51,000) $ 162,000 33,000 $ 13s $ 172,000 137 $ b. Assume that more than one product is being sold in each of the four following case situations: Case #3 Case #1 $ 445,000 Sales Case #2 $ 192,000 122,880 64,000 | $ Case #4 299,000 98,670 Variable expenses Fixed expenses Net operating income (loss) Average contribution margin ratio (percent) $ $ 52,100 38% 473,000 100,480 81% $ (20,670)

Answer 1

Answer of Part 1:

Case 1:

Contribution Margin = Sales – Variable Expenses
Contribution Margin = $221,000 - $144,500
Contribution Margin = $76,500

Contribution Margin per unit = Contribution Margin / Unit Sold
Contribution Margin per unit = $76,500 / 8,500
Contribution Margin per unit = $9

Net Operating Income/loss = Contribution Margin – Fixed Expenses
Net Operating Income/loss = $76,500 - $89,000
Net Operating loss = $12,500

Case 2:

Net Operating Income = Contribution Margin – Fixed Expenses
$33,000 = Contribution Margin - $162,000
Contribution Margin = $162,000 + $33,000
Contribution Margin = $195,000

Contribution Margin = Sales – Variable Expenses
$195,000 = $315,000 – Variable Expenses
Variable Expenses = $315,000 - $195,000
Variable Expenses = $120,000

Unit Sold = Contribution Margin / Contribution Marin per Unit
Unit Sold = $195,000 / $13
Unit Sold = 15,000

Case 3:

Contribution Margin = Contribution Margin per unit * Unit Sold
Contribution Margin = $13 * 20,000
Contribution Margin = $260,000

Contribution Margin = Sales – Variable Expenses
$260,000 = Sales - $200,000
Sales = $260,000 + $200,000
Sales = $460,000

Net Operating Income = Contribution Margin – Fixed Expenses
$172,000 = $260,000 – Fixed Expenses
Fixed Expenses = $260,000 - $172,000
Fixed Expense = $88,000

Case 4:

Net Operating Income = Contribution Margin - Fixed Cost
-$51,000 = Contribution Margin - $91,000
Contribution Margin = $40,000

Contribution Margin = Sales - Variable Expenses
$40,000 = $130,000 - Variable Expenses
Variable Expenses = $90,000

Contribution Margin per unit = Contribution Margin / Units Sold
Contribution Margin per unit = $40,000 / 5,000
Contribution Margin per unit = $8

Answer of Part b:

Case 1:

Average Contribution Margin Ratio = Contribution Margin / Sales
0.38 = Contribution Margin / $445,000
Contribution Margin = $445,000 * 0.38
Contribution Margin = $169,100

Net Operating Income = Contribution Margin – Fixed Expenses
$52,100 = $169,100 – Fixed Expenses
Fixed Expenses = $169,100 - $52,100
Fixed Expenses = $117,000

Contribution Margin = Sales – Variable Expenses
$169,100 = $445,000 – Variable Expenses
Variable Expenses = $445,000 - $169,100
Variable Expenses = $275,900

Case 2:

Contribution Margin = Sales – Variable Expenses
Contribution Margin = $192,000 - $122,880
Contribution Margin = $69,120

Net Operating Income = Contribution margin – Fixed Expenses
Net Operating Income = $69,120 - $64,000
Net Operating Income = $5,120

Average Contribution Margin Ratio = Contribution Margin / Sales *100
Average Contribution Margin Ratio = $69,120 / $192,000 * 100
Average Contribution Margin Ratio = 36%

Case 3:

Net Operating Income = Contribution margin – Fixed Expenses
$100,480 = Contribution Margin - $473,000
Contribution Margin = $100,480 + $473,000
Contribution Margin = $573,480

Average Contribution Margin Ratio = Contribution Margin / Sales
0.81 = $573,480 / Sales
Sales = $573,480 / 0.81
Sales = $708,000

Contribution Margin = Sales – Variable Expenses
$573,480 = $708,000 – Variable Expenses
Variable Expenses = $708,000 - $573,480
Variable Expenses = $134,520

Case 4:

Contribution Margin = Sales – Variable Expenses
Contribution Margin = $299,000 - $98,670
Contribution Margin = $200,330

Average Contribution Margin Ratio = Contribution Margin / Sales *100
Average Contribution Margin Ratio = $200,330 / $299,000 *100
Average Contribution Margin Ratio = 67%

Net Operating Income = Contribution Margin - Fixed Cost
-$20,670 = $200,330 - Fixed Cost
Fixed Cost = $221,000