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Chapter 3 Review Question

Ward Manufacturing produces metal picture frames. The company's income statements for the last two years are presented below:

	2017	2018
Units sold	50,000	70,000
Sales	$800,000	$1,120,000
Less: Cost of goods sold	550,000	710,000
Gross margin	250,000	410,000
Less: Operating expenses	150,000	190,000
Net income	$100,000	$220,000

The company has no beginning or ending inventories. All activity in this problem is in the relevant range. Required: a. Estimate the company's total variable cost per unit, and its total fixed costs per year using the high/low method. b. Prepare a contribution margin format income statement for 2018.