Global travel uses the contribution margin income statement internally. global's first-quarter results are as follows:

sales revenue $525,000
less: variable expenses: 210,000
contribution margin $315,000
less: fixed expenses 172,000
operating income $142,800
global's relevant range is sales of between $120,000 and $630,000.

1. prepare contribution margin income statements at sales levels of $230,000 and $400,000.
( hint: use the contribution margin ratio.)
2. begin by preparing the contribution margin income statement at the $230,000.

Contribution margin ratio = Contribution Margin / Sales

= $ 315,000 / $ 525,000

= 0.6 or 60%

Hence, contribution margin at $ 230,000  Sales = Contribution margin ratio * $ 230,000 ( Sales )

= 0.6 * 230,000 = $ 138,000 ( Part A )

Contribution margin at $ 400,000 Sales = 0.6 * $ 400,000

= $ 240,000 ( Part B )

At Sales level of $ 230,000

Sales revenue                                                             $ 230,000

- Variable expenses (Sales - Contribution margin)   $    92,000

Contribution Margin ( From Part A )                           $ 138,000                      

- Fixed Expenses                                                         $ 172,000

Operating Income / Loss                                            $ (34,000)

At Sales level of $ 400,000

Sales Revenue                                                            $ 400,000

- Variable expenses                                                    $ 160,000

Contribution Margin ( From part B )                           $ 240,000

- Fixed Expenses                                                         $ 172,000

Operating Income / Loss                                             $  68,000

Explanation:

Refer to the answer.

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