1. Now change all of the dollar amounts in the data area of your worksheet so that it looks like this:

Sales: $71,500

Variable costs:

cost of goods sold: 36,000

variable selling: 3,600

variable administrative: 3,400

Fixed costs:

fixed selling: 2,500

fixed administrative: $1,500

If your formulas are correct, you should get the correct answers to the following questions.

(a) What is the gross margin now?

(b) What is the net operating income now?

(c) What is the contribution margin now?

2. Suppose that sales are 2% higher as shown below:

Sales: $72,930

Variable costs:

COGS= 36,720

Variable selling: 3,672

variable admin: 3,468

Fixed costs:

fixed selling: 2,500

fixed admin: 1,500

Enter this new data into your worksheet. Make sure you enter all of the new data - not just the sales.

(a) What is the gross margin now?

(b) What is the net operating income now?

(c) What is the contribution margin now?

(d) When sales increase by 2%, which of the following should also increase by 2% in a merchandising company?

(You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

check all that apply 1

• Variable cost
• Fixed cost
• Gross margin
• Contribution margin
• Net operating income

(e) When sales increase by 2%, which of the following should increase by more than 2% in a merchandising company?

(You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

check all that apply 2

• Variable cost
• Fixed cost
• Gross margin
• Contribution margin
• Net operating income