Question

Carriage Company offers guided​ horse-drawn carriage rides through historic

Athens comma GeorgiaAthens, Georgia.

The carriage business is highly regulated by the city.

CranmoreCranmore

Carriage Company has the following operating costs during​April:

During April​

CranmoreCranmore

Carriage Company had

13 400

passengers.

SeventySeventy

percent of passengers were adults

​($2222

​fare) while

3030​%

were children

​($1414

​fare).

Requirements

1.

Prepare the​ company's contribution margin income statement for the month of April. Round all figures to the nearest dollar.

2.

Assume that passenger volume increases by
1717​%

in May. Which figures on the income statement would you expect to​change, and by what percentage would they​ change? Which figures would remain the same as in​ April?
Requirement 1. Prepare the​ company's contribution margin income statement for the month of April. Round all figures to the nearest dollar. ​(Do not round interim calculations or amounts. Round all amounts input in the table to the nearest​ dollar.)

Monthly depreciation expense on carriages and stable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,600

Fee paid to the City of Athens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20% of ticket revenue

Cost of souvenir set of postcards given to each passenger. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$0.85/set of postcards

Brokerage fee paid to independent ticket brokers (60% of tickets are issued through these

$1.50/ticket sold by broker

brokers; 40% are sold directly by the Cranmore Carriage Company). . . . . . . . . . . . . . . . . . . .

Monthly cost of leasing and boarding the horses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$50,000

Carriage drivers (tour guides) are paid on a per passenger basis. . . . . . . . . . . . . . . . . . . . . . . .

$3.50 per passenger

Monthly payroll costs of non-tour guide employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,750

Marketing, website, telephone, and other monthly fixed costs. . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,350

PrintDone

Cranmore Carriage Company

Contribution Margin Income Statement

For the Month Ended April 30

Sales revenue

Less:

Variable expenses

Fee paid to city

Complimentary postcards

Brokerage fee

Carriage driver wages

Contribution margin

Less:

Fixed expenses

Leasing and boarding horses

Non-carriage driver payroll expense

Depreciation expense

Other fixed operating expenses

Operating income

Answer 1

The Contribution Margin statement is a record of trading activities occurring within a period of 1 month to 1 year and showing the Margins a Business is making from its core operations

Step-by-step explanation:

Cranmore Carriage Company

Contribution Margin Income Statement

For the Month Ended April 30

Sales revenue ((13,400 x 70% x $22) + (13,400 x 30% x $14)) = $262,640

Less:

Variable expenses

Fee paid to city (20% x 262,640) = $52,528

Complimentary postcards ($0.85 x 13,400) = $11,390

Brokerage fee (13,400 x 60% x 1.50) = $12,060

Carriage driver wages (13,400 x $3.50) = $46,900

Contribution margin $139,762

Less:

Fixed expenses

Leasing and boarding horses $50,000

Non-carriage driver payroll expense $7,750

Depreciation expense $2,600

Other fixed operating expenses $7,350

Operating income $72,062

2.

17% increase in Volume will impact Contribution Margin by 17% and all the elements leading to the contribution Margin.

The Operating Income however, increases by 33%

The Fixed Expenses are the ones that remain unchanged

17% increase in Sales revenue ((15,678 x 70% x $22) + (15,678 x 30% x $14)) = $307,289

Less:

Variable expenses

17% increase in Fee paid to city (20% x 307,289) = $61,458

17% increase in Complimentary postcards ($0.85 x 15,678) = $13,326

17% increase in Brokerage fee (15,678 x 60% x 1.50) = $14,110

17% increase in Carriage driver wages (15,678 x $3.50) = $54,873

17% increase in Contribution margin $139,762

Less:

Fixed expenses

no change in Leasing and boarding horses $50,000

no change in Non-carriage driver payroll expense $7,750

no change in Depreciation expense $2,600

no change in Other fixed operating expenses $7,350

33% increase in Operating income $95,822