Question

Universal Travel uses the contribution margin income statement internally. Universal's first quarter results are as​ follows: LOADING...​(Click the icon to view the income​ statement.) Universal's relevant range is sales of between $ 105 comma 000 and $ 650 comma 000. Read the requirementsLOADING.... Requirement 1. Prepare contribution margin income statements at sales levels of $ 180 comma 000 and $ 420 comma 000. ​(​Hint: Use the contribution margin​ ratio.) Begin by preparing the contribution margin income statement at the $ 180 comma 000 level. ​(Round the variable expense rate to the nearest whole percent. Enter losses with a minus sign or​ parentheses.) Universal Travel Contribution Margin Income Statement Three Months Ended March 31 Sales revenue Less: Variable expenses Contribution margin Less: Fixed expenses Operating income (loss)

Universal Travel

Contribution Margin Income Statement

Three Months Ended March 31

Sales revenue

$450,000

Less: Variable expenses

171,000

Contribution margin

$279,000

Less: Fixed expenses

173,600

Operating income

$105,400

Answer 1

Contribution Margin ratio = Contribution margin / sales = 279000/450,000 = 62%

Variable cost ratio = (100-62)% = 38%

Sales @ 180,000

Sales revenue	180000
Variable cost (180000*38%)	68400
Contribution margin	111600
Fixed cost	173600
Operating loss	(62000)

Sales @ 420,000

Sales revenue	420000
Variable cost (420,000*38%)	159000
Contribution margin	261000
Fixed cost	173600
Net operating income	87400

Break even sales = Fixed cost / Contribution margin ratio

= 173600/62%

= 280000