Question

The following is Allison Corporation's contribution format income statement for December 2014: Sales $800,000 Less: variable expenses 300,000 Contribution margin 500,000 Less: fixed expenses 400,000 Operating income $100,000 The company had no beginning or ending inventories. The company produced and sold 10,000 units in December. Required: Assuming no change in either the cost structure or the average selling price, prepare a contribution format income statement for a month Allison Corporation reports no before-tax profit or loss: Short AnswerToolbar navigation opens in a dialog

Answer 1

Sales = $800,000

Number of units sold = 10,000

Selling price per unit = Sales/Number of units sold

= 800,000/10,000

= $80

Total variable expense = $300,000

variable expense per unit = Total variable expense/Number of units sold

= 300,000/10,000

= $30

Contribution margin per unit = Selling price per unit - variable expense per unit

= 80 - 30

= $50

Break even point (in units) = Fixed expense/Contribution margin per unit

= 400,000/50

= 8,000

contribution format income statement

Sales (8,000 x 80)	640,000
Variable expense (8,000 x 30)	-240,000
Contribution margin	400,000
Fixed expense	-400,000
Operating income	$0