Early in 2001, Delta Company (a retailing firm) sent the following income statement to its stockholders:

1. Prepare a contribution margin income statement. (Assume that the fixed components of the selling and administrative expenses are $\$ 3,000$ and $\$ 2,000$, respectively.)
2. Interpretive Question: Why is a contribution margin income statement helpful to management?
3. Interpretive Question: How would the analysis in (1) be different if the depreciation expense was considered a stepped cost with wide steps compared to the relevant range?

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Delta Company Income Statement For the Year Ended December 31, 2000 Sales revenue (1,000 units).. Less cost of goods sold (variable). Gross margin Operating expenses: Selling. Administrative. Depreciation (fixed) Insurance (fixed) Utilities ($20 fixed and $30 variable) Income.... $60,000 40,000 $20,000 $ 6,000 4,000 1,000 50 50 11,100 $ 8,900