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Preparing a contribution margin income statement

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Reference no: EM132871538

Problem 1 - Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is $21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense).

Calculate the number of pairs of shoes Chillmax must sell to earn operating income of $81,900.

Check your answer by preparing a contribution margin income statement based on the number of units calculated.

Problem 2 - Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense).

Calculate the sales revenue that Chillmax must make to earn operating income of $81,900 by using the point in sales equation.

Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.

Reference no: EM132871538

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