Assume that you are part of the accounting team for Best Industries. The company has only one product that sells for $40 per unit. Best estimates total fixed costs to be $9,000. Best estimates direct materials cost of $8.00 per unit, direct labor costs of $10.00 per unit, and variable overhead costs of $2.00 per unit. The CEO would like to see what the gross margin and operating income will be if 700 units are sold in the next period. Prepare a contribution margin income statement.

Sales -

Less: Variable Costs -

Contribution Margin -

Less: Fixed costs -

Operating Income -

Further analysis of Best Industriess fixed costs revealed that the company actually faces annual fixed overhead costs of $9,800 and annual fixed selling and administrative costs of $4,200. Variable cost estimates are correct: direct materials cost, $8.00 per unit; direct labor costs, $10.00 per unit; and variable overhead costs, $2.00 per unit. At this time, the selling price of $40 will not change. Complete the following formulas for the revised fixed costs. Enter the ratio as a percentage.

Contribution Margin per Unit = $_________ - $__________ = $_________

Contribution Margin Ratio = $________ = __________% / ___________%

Units Sold at Break-Even Point = __________ units

Assume that the number of units that Best sold exceeded the break-even point by one (1).

How much would operating income be? $_____________

What would operating income be if the units sold exceeded the break-even point by five (5) units? $________________