Question - A company's contribution format income statement for the most recent month is given below:
Sales (13,500 units at $20 per unit) $270,000
Variable costs $135.000
Contribution margin $135,000
Fixed costs $90,000
Net operating income $45,000
The president is convinced that 20% reduction in price, along with a $50,000 advertising surge will cause unite sales to triple.
1- Prepare a contribution format income statement that reflects this proposal.
2- Reconcile (using specific incremental numbers) the difference in the net operating income compared to the original scenario. I'm not looking for line-by- line differences in the two income statements?