First Nation Travel uses the contribution margin income statement internally. First Nation’s first-quarter results follow. First Nation’s relevant range is between sales of $100,000 and $700,000.
FIRST NATION TRAVEL
contribution margin Income Statement
Three Months Ended March 31
Sales revenue............................................................................................ $500,000
Less: Variable expenses............................................................................ 100,000
contribution margin................................................................................ $400,000
Less: Fixed expenses................................................................................. 150,000
Operating income..................................................................................... $250,000
Requirements
1. Prepare contribution margin income statements at sales levels of $150,000 and $600,000. (Hint: Use the contribution margin ratio.)
2. Compute break-even sales in dollars.