Acc350 Managerial Accounting: E21-31 For its top managers, Worldwide Travel formats

Acc350 Managerial Accounting
E21-31 Calculating contribution margin ratio, preparing contribution margin income statements
For its top managers, Worldwide Travel formats its income statement as follows:
Contribution Margin Income Statement
Three Months Ended March 31, 2014
Sales Revenue 317,500
Variable Costs 95,250
Contribution Margin 222,250
Fixed Costs 175,000
Operating Income 47,250
Worldwide’s relevant range is between sales of $245,000 and $364,000.

1. Calculate the contribution margin ratio.
2. Prepare two contribution margin income statements: one at the $245,000 sales and one at the $364,000 level. (Hint: The proportion of each sales dollar that goes towards variable costs is constant within the relevant range.)
3. Calculate breakeven sales in dollars.
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