18. Absorption Statement to Variable Costing Stmt ABSORPTION STMT TO VARIABLE COSTING STMT Quarter 1 Quarter 2 % Change Sales 750000 787500 5% CGS 340000 346000 Gross Profit 410000 441500 Op Exp 116000 118100 Op Income 294000 323400 10% The Absorption Statements above have been adjusted for any product price changes and depreciation changes from Quarter 1 through the end of Quarter 2. Using the Degree of Operational Leverage (DOL) re-state each quarter into a Variable Costing Statement. Reference: % Change in Sales X DOL = % Change in Op Income. DOL for Quarter #1 must equal = Since DOL CM/Op Income, then Quarter #1 CM must be = With this information, format Quarter #1 into a variable costing statement below. Sales Quarter #1 Variable Costing Statement Total Variable Costs Contribution Margin Fixed Cost Operating Income Use the Contribution Margin Ratio of Quarter #1 to format a Variable Costing Statement for Quarter #2. Quarter #2 Variable Costing Statement Sales Total Variable Costs Contribution Margin Fixed Cost Operating Income (Hint: Fixed Cost should be the same for both Quarters)