This Excel worksheet form is to be used to recreate Exhibit 1–7. The workbook, and instructions on how to complete the file, can be found in Connect.

Required:
1. Check your worksheet by changing the variable selling cost in the Data area to $900, keeping all of the other data the same as in Exhibit 1–7. If your worksheet is operating properly, the net operating income under the traditional format income statement and under the contribution format income statement should now be $700 and the contribution margin should now be $4,700. If you do not get these answers, find the errors in your worksheet and correct them.
How much is the gross margin? Did it change? Why or why not?
2. Suppose that sales are 10% higher as shown below:

Sales... Variable costs: $13,200 Cost of goods sold... ... $6,600 Variable selling.... $660 Variable administrative.

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A 1 Chapter 1: Applying Excel 2 3 Data 4 Sales B $12,000 5 Variable costs: 6 Cost of goods sold $6,000 7 Variable selling $600 8 Variable administrative $400 9 Fixed costs: 10 Fixed selling $2,500 11 Fixed administrative $1,500 12 0 D 13 Enter a formula into each of the cells marked with a ? below 14 Exhibit 1-7 15 16 Traditional Format Income Statement 17 Sales 18 Cost of goods sold 19 Gross margin 20 Selling and administrative expenses: 21 Selling 22 Administrative 23 Net operating income 24 25 Contribution Format Income Statement 26 Sales 27 Variable expenses: 28 Cost of goods sold 29 Variable selling 30 Variable administration 31 Contribution margin ? ? ? ? ? ? ? ? ? ? ? ? ? 32 Fixed expenses: 33 Fixed selling 34 Fixed administrative ? ? ? ? 35 Net operating income 36 144 Chapter 1 Form Filed in Chapter 1 Form