Question

Northern Travel uses the contribution margin income statement internally Northern's first quarter results are as follows: (Click the icon to view the income statement) Northern's relevant range is sales of between $150,000 and $650,000. Read the requirements Northern Travel Contribution Margin Income Statement Three Months Ended March 31 Sales revenue 180000 Less Variable expenses Contribution margin 172,200 Less: Fixed expenses Operating income (loss)

Answer 1

Contribution margin ratio= Contribution/ sales
                                       = 315000 /525000
                                      = 60%                      

Variable expense =100%- Contribution margin ratio
                          = 100% - 60 %
                           = 40% of Sale

Answer 1.

Contribution Margin Income statement (at sales level $ 180,000)
Three Month ended March 31
Sales Revenue	$ 180,000
Less: Variable expenses (40% of $ 1,80,000)	$   72,000
Contribution Margin	$ 108,000
Less: Fixed expenses	$ 172,200
Operating Income (Loss)	$ - 64,200

Contribution Margin Income statement (at sales level $ 400,000)
Three Month ended March 31
Sales Revenue	$ 400,000
Less: Variable expenses (40% of $ 4,00,000)	$ 160,000
Contribution Margin	$ 240,000
Less: Fixed expenses	$ 172,200
Operating Income	$ 67,800

Answer 2.

Break even sales in Dollars =   Fixed Expenses / Contribution margin ratio
                                             = $1,72,200 / 60%
                                             = $287,000