Refer to the information in Exercise 21-16.
HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2017
Sales (9,600 units at $225 each).................................$2,160,000
Variable costs (9,600 units at $180 each) .......................1,728,000
Contribution Margin..................................................432,000
Fixed costs............................................................324,000
Pretax income......................................................$ 108,000
1. Compute the company's degree of operating leverage for 2017.
2. If sales decrease by 5% in 2018, what will be the company's pretax income?
3. Assume sales for 2018 decrease by 5%. Prepare a Contribution Margin income statement for 2018.