Contribution Income Statement
Sales (10,000 units) ..	100,000
Variable expenses	60,000
Contribution Margin	40,000
Fixed expenses	30,000
Net Operating Income .	10,000

1. ABC Company sells a single product, has provided its contribution format income statement for June.

Required:

1. ABC is considering focusing on using a higher quality material which will increase variable costs. Specifically, the higher priced material will increase variable costs by 10%, and cost accountants estimate the higher quality will result in higher sales by $5,000. Prepare Contribution Income Statement which details the changes in net operating income. (4 marks)

2. Another accountant proposes using a cheaper material. The new material will decrease variable costs 20%, but management expects the lower quality will reduce sales by $15,00. Prepare Contribution Income Statementassuming which details the changes in net operating income. (4 marks)