C 1 Problem 4: CM Income Statement, Breakeven, Required sales units and What-if Scenario (12+2+5+2+3+5) 2 FunSports Inc produces snowboards, which it sells for $250 per unit. The company's forecast 3 income statement for December 20YY for producing and selling 10,000 snowboards is as follows: 4 5 6 FunSports Inc. Income Statement for December 20YY $ 7 Sales revenue (10,000 snowboards @$80 per unit) Re $800,000 8 Variable cost of goods sold (10,000 snowboards @$17 per unit) CM $170,000 9 Fixed cost of goods sold Bra $400,000 10 Gross profit Bre $230,000 11 Shipping and handling expense (10,000 snowboards @$1 per unit) Rec $10,000 12 Administrative salaries $25,000 Ope 13 Variable selling expenses (10,000 snowboards @$2 per unit) Per $20,000 14 Fixed advertising expenses Incr $12,000 15 Other administrative fixed costs including office depreciation $13,000 16 Net income 17 $150,000 18 Required: 20 19 A. Prepare a contribution margin format Income statement for December 20YY. 21 FunSports Inc. 22 23 Contribution margin-based income statement for December 20YY 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 B. Calculate the company's Unit Contribution Margin (CMU) 40 Unit contribution margin: $ per unit 41 42 C. Calculate the company's Break-even units and Break-even Dollars, 43 Breakeven units: units 44 Breakeven sales: 45 46 D. Calculate the required sales unit for December 20YY to earn a net income of $450,0002 47 Required sales unit units 48 49 E. Using your answer from part A), calculate FunSports's operating leverage 50 Operating leverage 51 52 F. If the sales revenue in December increases by 20%, 53 ) What would be the percentage increase in Net Income? 54 ) What would be the net income following the increase in sales revenue? 55 56