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The Chapter 1 Form worksheet is to be used to create your own worksheet version of Exhibit 1-7 in the text.

1. Now change all of the dollar amounts in the data area of your worksheet so that it looks like this:

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 20% 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 20%, which of the following should also increase by 20% in a merchandising company? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

check all that apply 1

Variable costunanswered

Fixed costunanswered

Gross marginunanswered

Contribution marginunanswered

Net operating incomeunanswered

(e) When sales increase by 20%, which of the following should increase by more than 20% in a merchandising company? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)