For its top managers, Aussie Travel formats its income statement as follows:

Aussie's relevant range is between sales of \(\$ 250,000\) and \(\$ 360,000\).

Requirements

1. Calculate the contribution margin ratio.

2. Prepare two contribution margin income statements: one at the \(\$ 250,000\) level and one at the \(\$ 360,000\) level. The proportion of each sales dollar that goes toward variable costs is constant within the relevant range. The proportion of each sales dollar that goes toward contribution margin also is constant within the relevant range.

3. Compute breakeven sales in dollars.

AUSSIE TRAVEL Contribution Margin Income Statement Three Months Ended March 31, 2007 Sales revenue Variable costs Contribution margin Fixed costs Operating income $312,500 125,000 187,500 170,000 $ 17,500