Question

The following CVP income statements are available for Blanc Company and Noir Company. Blanc Company Noir

Company Sales $455,000 $455,000 Variable costs 273,000 227,500 Contribution margin 182,000 227,500 Fixed costs 159,250 204,750 Net income $22,750 $22,750

Assuming that sales revenue increases by 20%, prepare a CVP income statement for each company. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Blanc Company		Noir Company
Sales		$Enter a dollar amount		$Enter a dollar amount
Variable costs		Enter a dollar amount		Enter a dollar amount
Contribution margin		Enter a total of the two previous amounts		Enter a total of the two previous amounts
Fixed costs		Enter a dollar amount		Enter a dollar amount
Net income / (Loss)		$Enter a total amount for this statement		$Enter a total amount for this statement

Assuming that sales revenue decreases by 20%, prepare a CVP income statement for each company. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Blanc Company		Noir Company
Sales		$Enter a dollar amount		$Enter a dollar amount
Variable costs		Enter a dollar amount		Enter a dollar amount
Contribution margin		Enter a total of the two previous amounts		Enter a total of the two previous amounts
Fixed costs		Enter a dollar amount		Enter a dollar amount
Net income / (Loss)		$Enter a total amount for this statement		$Enter a total amount for this statement

Answer 1

The CVP income statement, if sales revenue increases by 20% is shown below
	Blanc company	Noir company
Sales (455,000*1.2)	$546,000	$546,000
Variable costs	$273,000	$227,500
Contribution margin	$273,000	$318,500
Fixed costs	$159,250	$204,750
Net income/(Loss)	$113,750	$113,750
The increase in sales revenue would increase the net income
The CVP income statement, if sales revenue decreases by 20% is shown below
	Blanc company	Noir company
Sales (455,000*0.80)	$364,000	$364,000
Variable costs	$273,000	$227,500
Contribution margin	$91,000	$136,500
Fixed costs	$159,250	$204,750
Net income/(Loss)	-$68,250	-$68,250
Decrease in sales revenue would lead to loss for both company