Early in 2013, Lily Company (a retailing firm) sent the

Early in 2013, Lily Company (a retailing firm) sent the following income statement to its stockholders:

Lily Company Income Statement For the Year Ended December 31, 2012 Sales revenue (8,000 units) Less cost of goods sold (

1. Prepare a contribution margin income statement. (Assume that the fixed components of the selling expenses and administrative expenses are $20,000 and $20,000, respectively.)
2. Interpretive Question: Why is a contribution margin income statement helpful to management?
3. Interpretive Question: How would the analysis in part (1) be different if the depreciation expense was considered a stepped cost with wide steps compared to the relevantrange?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...