Question

Zhao Co. has fixed costs of $286,200. Its single product sells for $163 per unit, and variable costs are $110 per unit. The company expects sales of 10,000 units. Prepare a contribution margin income statement for the year ended December 31, 2017.

Answer 1

The contribution margin income statement for Zhao Co. shows a total sales of $1,630,000, total variable costs of $1,100,000, a contribution margin of $530,000, fixed costs of $286,200, and a net income of $243,800.

Step-by-step explanation:

When preparing a contribution margin income statement for Zhao Co., we need to calculate the contribution margin by subtracting the variable cost per unit from the selling price per unit, and then multiply by the number of units sold.

Sales (10,000 units x $163) = $1,630,000

Less Variable Costs (10,000 units x $110) = ($1,100,000)

Contribution Margin = $530,000

Less Fixed Costs = ($286,200)

Net Income = $243,800

This statement provides insights into how much contribution margin is generated to cover fixed costs and to contribute to net income.