Problem 119 Traditional and Contribution Format Income State

Problem 1-19 Traditional and Contribution Format Income Statements [LO1-6 14,eee 5 140,000 5 7,0e0 8,400 $ 1e,580 42,000

Solution

1)

2)cost of goods sold =Beginning inventory +purchase- ending inventory

       = 14000+140000-7000

      = 147000

Fixed selling expense =Total fixed cost -Fixed administration expense

         =29400-8400

          = 21000

Variable administration expense= Total variable cost- cost of sales-variable selling

      = 168000-147000-10500

         = 10500

3)selling price per unit =sales/ unit sold

                = 210000/1000

                = $ 210

4)variable cost =variable cost/ units

          = 168000/1000

            = $ 168

5)contribution per unit = contribution /unit

            = 42000/1000

               = $ 42

6)Contribution changes with change to unit sold as fixed cost remain same irrespective of level of output.

so contribtuion margin income statement will be useful to managers

Contribution Margin Income statement
Sales	210000
less:Variable expense [210000-42000]	(168000)
contribution margin	42000
less:fixed cost   [42000-12600]	(29400)
Net operating income	12600