Refer to the information in Exercise In Exercise HUDSON CO Contribution Margin
Refer to the information in Exercise.
In Exercise
HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2015
Sales (9,600 units at $225 each) . . . . . . . . . . . . . . . . $2,160,000
Variable costs (9,600 units at $180 each) . . . . . . . . . 1,728,000
Contribution margin . . . . . . . . . . . . . . . . . . . . . . . . . $ 432,000
Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,000
Pretax income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,000
1. Compute the company’s degree of operating leverage for 2015.
2. If sales decrease by 5% in 2016, what will be the company’s pretax income?
3. Assume sales for 2016 decrease by 5%. Prepare a contribution margin income statement for 2016.
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