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Global Travel

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For its top managers, Global Travel formats its income statement as follows:

Sales revenue  312,500
Variable costs  125,000
Contribution margin  187,500
Fixed costs  175,000
Operating income  12,500

Worldwide’s relevant range is between sales of $255,000 and $360,000.

1. Calculate the contribution margin ratio.
2. Prepare two contribution margin income statements: one at the $255,000 level
and one at the $360,000 level. (Hint: The proportion of each sales dollar that
goes toward variable costs is constant within the relevant range.)
3. Compute breakeven sales in dollars.

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