EXHBIT 1-7

Required information The Chapter 1 Form worksheet is to be used to create your own worksheet version of Exhibit 1-7 in Now change all of the dollar amounts in the data area of your worksheet so that it looks like this: EXIHIBIT 1-7 Comparing Traditional and Contribution Format Income Statements for Merchendising Companies (all numbers are given) "For a manufacturng company, the cost of goods sold would include some variable costs, such as direct materials, direct labot, and variable overhead, and some fixed costs, such as fixed manufacturing overhead: Income statement formats for muanufacturing companies will be explored in greater detail in a sabsequent chaptor Costofgoods=merchandise+Purchasesmerchandisesoldinventoryinventory=$7,000+$3,000$4,000=86,000 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 24% higher as shown below: 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 24%, which of the following should also increase by 24% in a merchandising company? (You may select more then one onswer. Single click the box with the question mark to produce o check mark for a correct onswer and double click the box with the question mark to empty the box for o wrong answer. Any boxes left with a question mark will be outomatically graded as incorrect.) Variable cost Fixed cost ? Gross margin ? Contribution margin ? Net operating income (e) When sales increase by 24%, which of the following should increase by more than 24 o in a merchandising compamy? (You moy select more then one answer. Single click the box with the question mark to produce o check mark for a correct answer and double click the box with the question merk to empty the box for a wrong onswer. Any boxes laft with a question mark will be eutomatically graded as incorrect.)