Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a $300 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $210,000, up to a maximum capacity of 550,000 yards of rope. Forecasted variable costs are $240 per 100 yards of XT rope.

3. Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point.

PRAVEEN CO.
Contribution Margin Income Statement (at Break-Even) — Product XT
		Units	$ per unit	Total
	Salesselected answer correct	5,500selected answer incorrect	$300selected answer correct	$1,650,000
not attempted	Variable costselected answer correct	5,500	240selected answer correct	1,320,000
	Contribution margin	5,500	$60selected answer correct	330,000
not attempted	Fixed costsselected answer correct			210,000selected answer correct
	Net incomeselected answer correct			$120,000