The Skateboard Zone, Inc.

Income Statement

For the period ended December 31, 2020

Sales		$800,000
Cost of goods sold		300,000
Gross Margin		500,000
Selling and administrative expenses:
Selling expenses	$250,000
Administrative expenses	160,000	410,000
Net operating income		$90,000

Skateboards sell, on the average, for $400 each. The company does not make the skateboards: it purchases them from a supplier for $150 per skateboard. Variable selling expenses are $50 per skateboard sold. The remaining selling expenses are fixed. The administrative expenses are 25% variable and 75% fixed.

Required:

1. Redo the income statement in the contribution margin format.
2. Calculate the contribution margin per unit and contribution margin ratio.
3. Calculate the breakeven point in units and in dollars of sales.
4. Calculate the margin of safety and margin of safety percentage.
5. Calculate the degree of operating leverage.
6. The company would like to earn $180,000 of net operating income. What will be the required sales in units and in dollars?