Shown here is an income statement in the traditional format for a firm with a sales volume of 20,000 units. Cost formulas also are shown:

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000

Cost of goods sold ($36,000 + $5.20/unit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000

Operating expenses:

Selling ($9,200 + $0.30/unit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,200

Administration ($18,800 + $0.50/unit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,800

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,000

Required:

a. Prepare an income statement in the contribution margin format.

b. Calculate the contribution margin per unit and the contribution margin ratio.

c. Calculate the firm’s operating income (or loss) if the volume changed from

20,000 units to

1. 28,000 units.

2. 12,000 units.

d. Refer to your answer to part a for total revenues of $200,000. Calculate the firm’s operating income (or loss) if unit selling price and variable expenses per unit do not change, and total revenues

1. Increase $60,000.

2. Decrease $52,000.