Contribution Margin Income Statement
Excel Assignment #2
Preparing a Contribution Margin Income Statement and Operating Leverage
Summer 2013
1. Assume that a company is budgeting to sell 2,500 units of a product at a selling price per unit of $32. The variable cost per unit is $26 and total fixed costs are $5,000.
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage.
2. Suppose the company is unsure exactly how many units they will sell. As such, their marketing department has provided a worst case scenario where sales would be 1,500 units and a best case scenario where sales would be 2,700 units. Assume that the selling price per unit, variable cost per unit and fixed costs will remain constant (per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for both the worst case scenario (sales of 1,500 units) and the best case scenario (sales of 2,700 units).
3. Suppose the company believes that 2,500 units is the most likely volume of sales. However, it is unsure at what selling price per unit it will be able to charge. The marketing department has provided a high estimate of $40 per unit and a low estimate of $30 per unit. Assume that variable costs per unit and fixed costs will remain constant (per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for both the high ($40 per unit) and low ($30 per unit) estimate of the selling price.
4. Suppose the company believes that 2,500 units is the most likely volume of sales and that $32 is the most likely selling price per unit. However, the production department is unsure as to the exact variable cost per unit. The production department has provided a high cost per unit of $29 and a low cost per unit of $19. Assume that fixed costs will remain constant (per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for both the high variable
Preparing a Contribution Margin Income Statement and Operating Leverage
Summer 2013
1. Assume that a company is budgeting to sell 2,500 units of a product at a selling price per unit of $32. The variable cost per unit is $26 and total fixed costs are $5,000.
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage.
2. Suppose the company is unsure exactly how many units they will sell. As such, their marketing department has provided a worst case scenario where sales would be 1,500 units and a best case scenario where sales would be 2,700 units. Assume that the selling price per unit, variable cost per unit and fixed costs will remain constant (per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for both the worst case scenario (sales of 1,500 units) and the best case scenario (sales of 2,700 units).
3. Suppose the company believes that 2,500 units is the most likely volume of sales. However, it is unsure at what selling price per unit it will be able to charge. The marketing department has provided a high estimate of $40 per unit and a low estimate of $30 per unit. Assume that variable costs per unit and fixed costs will remain constant (per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for both the high ($40 per unit) and low ($30 per unit) estimate of the selling price.
4. Suppose the company believes that 2,500 units is the most likely volume of sales and that $32 is the most likely selling price per unit. However, the production department is unsure as to the exact variable cost per unit. The production department has provided a high cost per unit of $29 and a low cost per unit of $19. Assume that fixed costs will remain constant (per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for both the high variable