Contribution Margin Income Statement Early in 2010, Lili H Company (a retailing firm) sent the following income statement to its stockholders:

Required:
1. Prepare a contribution margin income statement. (Assume that the fixed components of the selling expenses and administrative expenses are $20,000 and $20,000, respectively.)
2. Interpretive Question: Why is a contribution margin income statement helpful to management?
3. Interpretive Question: How would the analysis in part (1) be different if the depreciation expense was considered a stepped cost with wide steps compared to the relevant range?

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Lili H Company Income Statement For the Year Ended December 31, 2009 Sales revenue (8,000 units) Less cost of goods sold (variable) Gross margin... Selling. Operating expenses: Administrative Depreciation (fixed) Insurance (fixed) Utilities ($200 fixed and $300 variable) Profit $600,000 450,000 $150,000 $ 60,000 40,000 10,000 500 500 111,000 $ 39,000