Chapter 2, Problem 2.22P

1.

To determine

Introduction:

Contribution margin: It is also known as gross margin. It is the value derived after deducting the variable expenses from the total sales value. It has one more feature. When the value of fixed expenses is deducted from the contribution margin, we can derive the net income.

The Company’s CM ratio and the break-even point in unit sales and dollar sales

2.

To determine

Introduction:

Contribution margin: It is also known as gross margin. It is the value derived after deducting the variable expenses from the total sales value. It has one more feature. When the value of fixed expenses is deducted from the contribution margin, we can derive the net income.

The increase/decrease in company’s net operating income.

3.

To determine

Introduction:

Contribution margin: It is also known as gross margin. It is the value derived after deducting the variable expenses from the total sales value. It has one more feature. When the value of fixed expenses is deducted from the contribution margin, we can derive the net income.

The revised net operating income/loss.

4

To determine

Introduction:

Contribution margin: It is also known as gross margin. It is the value derived after deducting the variable expenses from the total sales value. It has one more feature. When the value of fixed expenses is deducted from the contribution margin, we can derive the net income.

The number of units sold to attain a target profit of $9750.

5

To determine

Introduction:

Contribution margin: It is also known as gross margin. It is the value derived after deducting the variable expenses from the total sales value. It has one more feature. When the value of fixed expenses is deducted from the contribution margin, we can derive the net income.

The new CM ratio along break-even point in unit sales and dollars sales.

5b

To determine

Introduction:

Contribution margin: It is also known as gross margin. It is the value derived after deducting the variable expenses from the total sales value. It has one more feature. When the value of fixed expenses is deducted from the contribution margin, we can derive the net income.

To prepare: Two contribution statements showing units and percentages.

5c

To determine

Introduction:

Contribution margin: It is also known as gross margin. It is the value derived after deducting the variable expenses from the total sales value. It has one more feature. When the value of fixed expenses is deducted from the contribution margin, we can derive the net income.

To evaluate: Whether the automation of the company’s operations is right or wrong.