Outback Outfitters sells recreational equipment. One of the companys products, a small camp stove, sells for $100 per unit. Variable expenses are $70 per stove, and fixed expenses associated with the stove total $147,000 per month.

At present, the company is selling 17,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. Outback Outfitters Contribution Income Statement Stoves - Present Stoves - Proposed 18,750 X 17000 Total Per unit Total Per unit Sales $ 1,500,000 X $ 100 $ 1,687,500 X $ 90 Variable expenses 1,050,000 70 1,312,500 X 70 Contribution margin 450,000 $ 30 375,000 $ 20 Fixed expenses 147,000 147,000 228,000 Net operating income $ 303,000 $