Data
Sales	$12,000
Variable costs:
Cost of goods sold	$6,000
Variable selling	$900
Variable administrative	$400
Fixed costs:
Fixed selling	$2,500
Fixed administrative	$1,500
Enter a formula into each of the cells marked with a ? below
Exhibit 2-12
Traditional Format Income Statement
Sales		?
Cost of goods sold		?
Gross margin		?
Selling and administrative expenses:
Selling	?
Administrative	?	?
Net operating income		?
Contribution Format Income Statement
Sales		?
Variable expenses:
Cost of goods sold	?
Variable selling	?
Variable administration	?	?
Contribution margin		?
Fixed expenses:
Fixed selling	?
Fixed administrative	?	?
Net operating income		?

Required:

Check your worksheet by changing the variable selling cost in the Data area to $900, keeping all of the other data the same as in Exhibit 29. If your worksheet is operating properly, the net operating income under the traditional format income statement and under the contribution format income statement should now be $700 and the contribution margin should now be $4,700. If you do not get these answers, find the errors in your worksheet and correct them.

How much is the gross margin? Did it change? Why or why not?

Suppose that sales are 10% higher as shown below:

Sales	$13,200
Variable costs:
Cost of goods sold	$6,600
Variable selling	$990
Variable administrative	$440
Fixed costs:
Fixed selling	$2,500
Fixed administrative	$1,500

d

Enter this new data into your worksheet. Make sure that you change all of the data that are differentnot just the sales. Print or copy the income statements from your worksheet.

What happened to the variable costs and to the fixed costs when sales increased by 10%? Why? Did the contribution margin increase by 10%? Why or why not? Did the net operating income increase by 10%? Why or why not?