1. Assuming the same relevant range, what can the owner expect her operating costs to be if occupancy falls to 55%?
2. For internal planning and decision-making purposes, the owner of Two Turtles would like to translate the company's income statement into the contribution margin format. Since Two Turtles is web-based, all of its cost of goods sold is variable. A large portion of the selling and marketing expenses consists of freight-out charges ($19,000), which were also variable. Only 20% of the remaining selling and marketing expenses and 25% of the website expenses were variable. Of the other operating expenses, 90% were fixed.
Based on the information, prepare Two Turtles' contribution margin income statement for last year.