Smart Phones Pty Ltd produces mobile phones. The company prepared the following budgeted income statement.

The director, Thomas Smith, wants to use this income statement as the basis for projecting the profits for the forthcoming year. He needs to know what the projected profit will be if the unit sales of phones increase by 20%. The following relevant information is available.

Required
(a) Restructure the previous year’s income statement to present it in contribution margin format.
(b) What is the contribution margin for each phone?
(c) Assuming the selling price and all costs remain unchanged, what will be the projected profit for the forthcoming year?

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Sales Cost of sales Gross profit Expenses Selling expenses Administrative expenses Profit $260000 110000 $2560 000 1 028 000 1532 000 370 000 $1 162 000