Mountain Sports Ltd. is a small, Lethbridge-based company located on a major street in the west end.Marconi, an owner, is the Company President while Jeff Peterson, another owner, holds the position of Marketing Manager.The company was formed in 2012.

Mountain Sports carries a limited line of products and services that can be divided into four segments:

1.Cross-country ski packages (skis, boots, and poles)

2.Mountain bicycles

3.Accessories

4.Repair and service department

Page BreakIII.Question 1 Contribution Margin Income Statement & CVP Analysis

Part A: (answer in the Excel Solution Workbook file on the Question 1 tab)

In order to evaluate the operations of Mountain Sports Ltd., you must reformat the company's 2018 Income Statement using the Contribution Margin Income Statement approach.

The following information relates to operating expenses:

1. Total fixed salary costs are $207,199. Employees of the Cross-Country Ski Packages, Mountain Bicycles, and Accessories divisions receive a 10% commission on all sales. The Repair & Service department's employees do not receive a commission.

1. The rent is fixed at $4,000 per month.

1. Utilities are fixed costs.

1. Repairs and Service expense varies with sales activity.

1. Depreciation and property taxes are fixed costs.

1. Advertising costs are fixed.

III.Question 1 Contribution Margin Income Statement & CVP Analysis (continued)

Part B: (record answer below)

Calculate the following and explain to management what the final answer means: (show all calculations)

Answers:

1. the company's break-even point (in sales dollars)

1. the margin of safety percentage

1. the degree of operating leverage (DOL)