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:

a. Assume that only one product is being sold in each of the four following case situations:

b. Assume that more than one product is being sold in each of the four following case situations:

(For all requirements, Loss amounts should be indicated by a minus sign.)

Assume that only one product is being sold in each of the four following case situations:

required A

	Case #1 Case #2 Case #3 Case #4 Unit sold 8,300 20,900 5,900 Sales $265,600 $366,800 $194,700 Variable expenses 157,700 271,700 Fixed expenses 94,000 176,000 76,000 Net operating income (loss) $(5,700) $74,200 $12,500 Contribution margin per unit $13 $8

required B

	Case #1 Case #2 Case #3 Case #4 Sales $445,000 $194,000 $305,000 Variable expenses 131,920 100,650 Fixed expenses 53,000 475,000 Net operating income (loss) $45,650 $103,510 $(14,650) Contribution margin ratio (percent) 37 % % 83 % %

Answer 1

Answer to Requirement A:

Case 1:

Net Operating Income (loss) = Sales - Variable Expenses - Fixed Expenses
Net Operating Income (loss) = $265,600 - $157,700 - $94,000
Net Operating Income (loss) = $13,900

Contribution Margin per unit = (Sales - Variable Expenses) / Unit Sold
Contribution Margin per unit = ($265,600 - $157,700) / 8,300
Contribution Margin per unit = $13

Case 2:

Net Operating Income (loss) = Sales - Variable Expenses - Fixed Expenses
-$5,700 = $366,800 - Variable Expenses - $176,000
Variable Expenses = $196,500

Contribution Margin per unit = (Sales - Variable Expenses) / Unit Sold
$13 = ($366,800 - $196,500) / Unit Sold
Unit Sold = $13,100

Case 3:

Contribution Margin per unit = (Sales - Variable Expenses) / Unit Sold
$8 = (Sales - $271,700) / 20,900
Sales = $438,900

Net Operating Income (loss) = Sales - Variable Expenses - Fixed Expenses
$74,200 = $438,900 - $271,700 - Fixed Expenses
Fixed Expenses = $93,000

Case 4:

Net Operating Income (loss) = Sales - Variable Expenses - Fixed Expenses
$12,500 = $194,700 - Variable Expenses - $76,000
Variable Expenses = $106,200

Contribution Margin per unit = (Sales - Variable Expenses) / Unit Sold
Contribution Margin per unit = ($194,700 - $106,200) / 5,900
Contribution Margin per unit = $15

Answer to Requirement B:

Case 1:

Contribution Margin Ratio = (Sales - Variable Expenses) / Sales
0.37 = ($445,000 - Variable Expenses) / $445,000
Variable Expenses = $280,350

Net Operating Income (loss) = Sales - Variable Expenses - Fixed Expenses
$45,650 = $445,000 - $280,350 - Fixed Expenses
Fixed Expenses = $119,000

Case 2:

Net Operating Income (loss) = Sales - Variable Expenses - Fixed Expenses
Net Operating Income (loss) = $194,000 - $131,920 - $53,000
Net Operating Income (loss) = $9,080

Contribution Margin Ratio = (Sales - Variable Expenses) / Sales
Contribution Margin Ratio = ($194,000 - $131,920) / $194,000
Contribution Margin Ratio = 32%

Case 3:

Contribution Margin Ratio = (Sales - Variable Expenses) / Sales
0.83 = (Sales - Variable Expenses) / Sales
0.17 * Sales = Variable Expenses

Net Operating Income (loss) = Sales - Variable Expenses - Fixed Expenses
$103,510 = Sales - 0.17 * Sales - $475,000
$103,510 = 0.83 * Sales - $475,000
Sales = $697,000

Variable Expenses = 0.17 * Sales
Variable Expenses = 0.17 * $697,000
Variable Expenses = $118,490

Case 4:

Net Operating Income (loss) = Sales - Variable Expenses - Fixed Expenses
-$14,650 = $305,000 - $100,650 - Fixed Expenses
Fixed Expenses = $219,000

Contribution Margin Ratio = (Sales - Variable Expenses) / Sales
Contribution Margin Ratio = ($305,000 - $100,650) / $305,000
Contribution Margin Ratio = 67%