Certainly! Let's walk through both parts step by step. ## **Assumptions** Since the problem does **not** provide specific sales price, variable cost, or fixed cost data, I will outline the steps and show the format you should use. If you have more details, you can plug the numbers in directly. --- ## **Contribution Margin Income Statement Format** A contribution margin income statement looks like this: ``` Sales - Variable Costs = Contribution Margin - Fixed Costs = Operating Income ``` --- ## **a. Master Budget (Planned/Static Budget)** The **master budget** is based on the **planned/expected level of activity**. Here, **planned production and sales = 1,100 units**. Let’s define: - Selling price per unit = **SP** - Variable cost per unit = **VC** - Total fixed costs = **FC** ### **Step-by-Step:** 1. **Calculate Sales:** = Planned units × Selling price per unit = 1,100 × SP 2. **Calculate Variable Costs:** = Planned units × Variable cost per unit = 1,100 × VC 3. **Calculate Contribution Margin:** = Sales - Variable Costs 4. **Subtract Fixed Costs:** Fixed costs are typically the same regardless of units produced (within relevant range). 5. **Calculate Operating Income:** = Contribution Margin - Fixed Costs ### **Pro Forma Income Statement (Master Budget):** | Description | Calculation | Amount | |---------------------|--------------------|------------------| | Sales | 1,100 × SP | = 1,100SP | | Variable Costs | 1,100 × VC | = 1,100VC | | Contribution Margin | 1,100SP - 1,100VC | = 1,100(SP-VC) | | Fixed Costs | FC | = FC | | Operating Income | 1,100(SP-VC) - FC | | --- ## **b. Flexible Budget** The **flexible budget** is based on the **actual level of activity**. Here, **actual production and sales = 1,200 units**. ### **Step-by-Step:** 1. **Calculate Sales:** = Actual units × Selling price per unit = 1,200 × SP 2. **Calculate Variable Costs:** = Actual units × Variable cost per unit = 1,200 × VC 3. **Calculate Contribution Margin:** = Sales - Variable Costs 4. **Subtract Fixed Costs:** Fixed costs remain the same as in the master budget. 5. **Calculate Operating Income:** = Contribution Margin - Fixed Costs ### **Pro Forma Income Statement (Flexible Budget):** | Description | Calculation | Amount | |---------------------|--------------------|------------------| | Sales | 1,200 × SP | = 1,200SP | | Variable Costs | 1,200 × VC | = 1,200VC | | Contribution Margin | 1,200SP - 1,200VC | = 1,200(SP-VC) | | Fixed Costs | FC | = FC | | Operating Income | 1,200(SP-VC) - FC | | --- ## **Summary Table** | | Master Budget (1,100 units) | Flexible Budget (1,200 units) | |---------------------|----------------------------------|----------------------------------| | Sales | 1,100SP | 1,200SP | | Variable Costs | 1,100VC | 1,200VC | | Contribution Margin | 1,100(SP-VC) | 1,200(SP-VC) | | Fixed Costs | FC | FC | | Operating Income | 1,100(SP-VC) - FC | 1,200(SP-VC) - FC | --- ### **Final Answer (in terms of SP, VC, and FC):** **a. Master Budget Contribution Format Income Statement:** ``` Sales (1,100 × SP) - Variable Costs (1,100 × VC) = Contribution Margin [1,100 × (SP - VC)] - Fixed Costs (FC) = Operating Income [1,100 × (SP - VC) - FC] ``` **b. Flexible Budget Contribution Format Income Statement:** ``` Sales (1,200 × SP) - Variable Costs (1,200 × VC) = Contribution Margin [1,200 × (SP - VC)] - Fixed Costs (FC) = Operating Income [1,200 × (SP - VC) - FC] ``` --- **If you provide actual numbers for SP, VC, and FC, I can substitute them to give you the numerical answers!**