Homework SourseHome Entertainment is a small familyowned business that purc
Home Entertainment is a small, family-owned business that purchases LCD televisions from a reputable manufacturer and sells them at the retail level. The televisions sell, on average, for $1,580 each. The average cost of a television from the manufacturer is $1,050.
Home Entertainment has always kept careful accounting records, and the costs that it incurs in a typical month are as follows:
Prepare an income statement for April using the traditional format with costs organized by function.
Prepare an income statement for April, this time using the contribution format with costs organized by behaviour. Show costs and revenues on both a total and a per unit basis down through contribution margin.
| Home Entertainment is a small, family-owned business that purchases LCD televisions from a reputable manufacturer and sells them at the retail level. The televisions sell, on average, for $1,580 each. The average cost of a television from the manufacturer is $1,050. |
| Home Entertainment has always kept careful accounting records, and the costs that it incurs in a typical month are as follows: |
Solution
COGS
COGS ($1050 per TV)
| 1 | Prepare an income statement for April using the traditional format with costs organized by function. | |||||||
| Sales | $ | 366560 | (232 tv*1580$) | |||||
| COGS | $ | 243600 | (232 tv*1050$) | |||||
| Gross Margin (A) | $ | 122960 | ||||||
| Selling and Administrative Expenses: | $ | |||||||
| Selling: | $ | |||||||
| Advertising | $ | 1,145 | ||||||
| Delivery of televisions | $ | 9744 | (42*232tv) | |||||
| Sales salaries and commissions (Fixed) | $ | 3,500 | ||||||
| Sales salaries and commissions (Variable) | $ | 18,328 | (5%*366560) | |||||
| Utilities | $ | 480 | per month | |||||
| Depreciation of sales facilities | $ | 3,080 | per month | |||||
| Total Selling Expense (B) | $ | 36,277 | ||||||
| Administrative: | $ | |||||||
| Executive salaries | $ | 11,800 | per month | |||||
| Depreciation of office equipment | $ | 530 | per month | |||||
| Clerical (Fixed) | $ | 2,020 | ||||||
| Clerical (Variable) | $ | 13,224 | ( $57 per television sold) | |||||
| Insurance | $ | 780 | per month | |||||
| Total Admn Expense © | $ | 28,354 | ||||||
| Net Operating Income (A-B-C) | $ | 58,329 | ||||||
| 2 | Prepare an income statement for April, this time using the contribution format with costs organized by behaviour. Show costs and revenues on both a total and a per unit basis down through contribution margin. | |||||||
| Total | Total | Per unit | Per unit | |||||
| Sales | 366,560.00 | 1,580.00 | ||||||
| Variable Expenses: | ||||||||
| COGS ($1050 per TV) | 243,600.00 | 1,050.00 | ||||||
| Delivery of televisions ($42/TV) | 9,744.00 | 42.00 | ||||||
| Sales salaries and commissions (5% of sales) | 18,328.00 | 79.00 | ||||||
| Clerical ( $57 per television sold) | 13,224.00 | 284,896.00 | 57.00 | 1,228.00 | ||||
| Contribution | 81,664.00 | 352.00 | ||||||
| Fixed Expense | ||||||||
| Advertising | 1,145.00 | 4.94 | ||||||
| Sales salaries and commissions (Fixed) | 3,500.00 | 15.09 | ||||||
| Utilities | 480.00 | 2.07 | ||||||
| Depreciation of sales facilities | 3,080.00 | 13.28 | ||||||
| Executive salaries | 11,800.00 | 50.86 | ||||||
| Depreciation of office equipment | 530.00 | 2.28 | ||||||
| Clerical (Fixed) | 2,020.00 | 8.71 | ||||||
| Insurance | 780.00 | 23,335.00 | 3.36 | 100.58 | ||||
| Ne Operating Income | 58,329.00 | 251.42 |
