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Question - For its top managers, Global Travel formats its income statement as follows:
GLOBAL TRAVEL Contribution Margin Income Statement Three Months Ended March 31, 2016
Sales Revenue $ 318,500
Variable Cost $111,475
Contribution Margin $207,025
Fixed Cost $175,000
Operating Income $ 32,025
Global's relevant range is between sales of $250,000 and $360,000.
Requirements
1. Calculate the contribution margin ratio.
2. Prepare two contribution margin income statements: one at the $250,000 sales level and one at the $360,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.)
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