Accounting

1. Case Summary

Your boss read a recent magazine article about income statements, but he was unclear about the differences between a traditional income statement and a contribution margin income statement. Explain the difference by: a) presenting a sample format for each statement, b) describing the focus of each statement, and c) discussing how and by whom each statement is used.

Case Analysis

2. Lowman Inc. sells a product with a sales price of $25 per unit, variable costs of $10 per unit, and total fixed costs of $100,000. Lowman is looking into implementing an aggressive advertising campaign that will cost $45,000.

By what amount do sales dollars need to at least increase by in order for the company's overall profits to not decrease by having the advertising campaign?

In 400 words: Discuss and describe the primary difference between traditional income statements and contribution margin income statements.

Discuss and describe the formula for computing the break-even point in sales dollars and units.