Homework SourseAn income statement for Sams Bookstore for the first quarter
An income statement for Sam\'s Bookstore for the first quarter of the year is presented below:
On average, a book sells for $50. Variable selling expenses are $4 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed.
The net operating income using the contribution approach for the first quarter is:
| Sam\'s Bookstore | ||||
| Income Statement | ||||
| For Quarter Ended March 31 | ||||
| Sales | $ | 1,000,000 | ||
| Cost of goods sold | 665,000 | |||
| Gross margin | 335,000 | |||
| Selling and administrative expenses | ||||
| Selling | $ | 107,000 | ||
| Administration | 118,000 | 225,000 | ||
| Net operating income | $ | 110,000 | ||
Solution
Sam\'s Bookstore
Income Statement
Variable Costing/Contribution approach
Sales
$1,000,000.00
Less: Variable Cost
Direct Variable cost
$ 665,000.00
Variable selling Expenses
$ 80,000.00
variable Administrative expenses
$ 30,000.00
Contribution Margin
$ 225,000.00
Less: Fixed Expenses
Fixed Selling Expenses
$ 27,000.00
Fixed Administrative expenses
$ 88,000.00
Net operating income
$ 110,000.00
Net Operating Income Using Contribution Approach will also be $ 110000.
This is Because manufacturing expenses are taken to be same as in absorption costing.
| Sam\'s Bookstore | |
| Income Statement | |
| Variable Costing/Contribution approach | |
| Sales | $1,000,000.00 |
| Less: Variable Cost | |
| Direct Variable cost | $ 665,000.00 |
| Variable selling Expenses | $ 80,000.00 |
| variable Administrative expenses | $ 30,000.00 |
| Contribution Margin | $ 225,000.00 |
| Less: Fixed Expenses | |
| Fixed Selling Expenses | $ 27,000.00 |
| Fixed Administrative expenses | $ 88,000.00 |
| Net operating income | $ 110,000.00 |
