Question

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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  • CreatedApril 23, 2015
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