Traditional Format Contribution Format $12,000 Sales $12,000 Sales Cost of goods sold 6,000 Variable expenses: Gross margin $6,000 6,000 Cost of goods sold Selling and administrative expenses: Variable selling 600 $3,100 7,000 Selling Variable administrative. 400 5,000 Contribution margin Administrative 1,900 5,000 1,000 Fixed expenses: Net operating income Fixed selling 2,500 4,000 Fixed administrative 1,500 1,000 Net operating income For a manufacturing company, the cost of goods sold would include some variable costs, such as direct materials, direct labor, and variable overhead, and some fixed costs, such as fixed manufacturing overhead. Income statement formats for manufacturing companies will be explored in greater detail in a subsequent chapter. Beginning Ending Cost of merchandise +Purchases merchandise goods sold inventory inventory Ending Beginning Cost of goods merchandise Purchases merchandise sold inventory inventory $3,000 $4,000 $7,000 $6,000 1. Now change all of the dollar amounts in the data area of your worksheet so that it looks like this: A B 1 Chapter 1: Applying Excel 2 Data 3 Sales $ 79,000 4 Variable costs: 5 Cost of goods sold 39,500 6 Variable selling $ 4,000 7 Variable administrative $ 3,800 Fixed costs: 9 Fixed selling $ 2,500 10 $ Fixed administrative 1,500 11 If your formulas are correct, you should get the correct answers to the following questions. (a) What is the gross margin now? Gross margin (b) What is the net operating income now? Net operating income (c) What is the contribution margin now? Contribution margin 2. Suppose that sales are 25% higher as shown below: Chapter 1: Applying Excel 1 2 Data 3 Sales $ 98,750 4 Variable costs: 5 $ Cost of goods sold 49,375 6 $ Variable selling 5,000 7 $ Variable administrative 4,750 8 Fixed costs: 9 Fixed selling $ 2,500 10 Fixed administrative $ 1,500 11 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? Gross margin (b) What is the net operating income now? Net operating income (c) What is the contribution margin now? Contribution margin (d) When sales increase by 25%, which of the following should also increase by 25% 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.) Variable cost Fixed cost Gross margin Contribution margin Net operating income (e) When sales increase by 25%, which of the following should increase by more than 25% 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.) Variable cost |Fixed cost Gross margin Contribution margin Net operating income