Excel Assignment #1
Preparing a Contribution Margin Income Statement and Operating Leverage
Summer 2009
1. Assume that a company is budgeting to sell 1,715 units of a product at a selling price
per unit of $34. The variable cost per unit is $24 and total fixed costs are $4,400.
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage.
2. Suppose the company is unsure exactly how many units they will sell. As such, their
marketing department has provided a worst case scenario where sales would be 1,335
units and a best case scenario where sales would be 1,995 units. Assume that the selling
price per unit, variable cost per unit and fixed costs will remain constant (per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for
both the worst case scenario (sales of 1,335 units) and the best case scenario (sales of
1,995 units).
3. Suppose the company believes that 1,715 units is the most likely volume of sales.
However, it is unsure at what selling price per unit it will be able to charge. The
marketing department has provided a high estimate of $41 per unit and a low estimate of
$28 per unit. Assume that variable costs per unit and fixed costs will remain constant
(per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for
both the high ($41 per unit) and low ($28 per unit) estimate of the selling price.
4. Suppose the company believes that 1,715 units is the most likely volume of sales and
that $34 is the most likely selling price per unit. However, the production department is
unsure as to the exact variable cost per unit. The production department has provided a
high cost per unit of $32 and a low cost per unit of $19. Assume that fixed costs will
remain constant (per part 1).
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for
both the high variable cost per unit ($32) and the low cost per unit ($19).
5. Suppose the company believes that 1,715 units is the most likely volume of sales, that
$34 is the most likely selling price per unit, and that $24 is the most likely variable cost
per unit. However, the accounting department is unsure as to the exact value of fixed
costs. They have provided a high estimate of fixed costs to be $6,300 and a low estimate
of fixed costs to be $2,700.
REQUIRED
Prepare a contribution margin income statement and calculate operating leverage for
both the high estimate of fixed costs ($6,300) and for the low estimate of fixed costs
($2,700).
© Copyright of Michael J. Meyer 2009. Use by permission only.
