Use the information from the following Income Statement to create and Projected Income Statement and solve the questions at bottom of the page. Complete the Income State to reflect the expected sales increase, then also complete the grey cells at the bottom of the page. Complete the other two spreadsheets in this workbook and after doing all the calculations discuss the impact of variable versus fixed expenses. Include in your conclusion which company you think is in the better financial situation and why. Use 3-4 paragraphs for your total discussion.

Income Statement

Projected Income Statement

Sales Revenue

$2,500,000

Variable Costs

Purchases

$750,000

0.3

Direct labor

$600,000

0.24

$1,350,000

$1,150,000

Fixed Costs

Selling

$500,000

Administrative

$485,000

Manufacturing Overhead

$150,000

$1,135,000

Profit

Dollars

Percentage

Calculate the Contribution Margin

Calculate the Gross Margin Ratio

Calculate Breakeven Sales

Calculate Margin of Safety based on the 5% expected sales increase.