Assume the company produces and sells 87,000 units during the year at a selling price of $9.60 per unit. Prepare a contribution format income statement for the year.
Question
Assume the company produces and sells 87,000 units during the year at a selling price of $9.60 per unit. Prepare a contribution format income statement for the year.
Solution
Sure, to prepare a contribution format income statement, we need to follow these steps:
-
Calculate Total Sales Revenue:
- Sales Revenue = Selling Price per Unit × Number of Units Sold
- Sales Revenue = $9.60 × 87,000
- Sales Revenue = $835,200
-
Determine Variable Costs:
- Variable costs are typically given per unit. If not provided, you would need that information to proceed. For this example, let's assume the variable cost per unit is $5.00.
- Total Variable Costs = Variable Cost per Unit × Number of Units Sold
- Total Variable Costs = $5.00 × 87,000
- Total Variable Costs = $435,000
-
Calculate Contribution Margin:
- Contribution Margin = Sales Revenue - Total Variable Costs
- Contribution Margin = 435,000
- Contribution Margin = $400,200
-
Determine Fixed Costs:
- Fixed costs are typically given as a total amount. For this example, let's assume the total fixed costs are $250,000.
-
Calculate Net Operating Income:
- Net Operating Income = Contribution Margin - Fixed Costs
- Net Operating Income = 250,000
- Net Operating Income = $150,200
Now, let's put this information into a contribution format income statement:
Contribution Format Income Statement
| Description | Amount |
|---|---|
| Sales Revenue | $835,200 |
| Less: Variable Costs | $435,000 |
| Contribution Margin | $400,200 |
| Less: Fixed Costs | $250,000 |
| Net Operating Income | $150,200 |
This format clearly separates variable costs from fixed costs and highlights the contribution margin, which is useful for decision-making purposes.
Similar Questions
Fill in the Blank QuestionFill in the blank question.A company produces a product with a contribution margin per unit of $36. If the company incurs $62,000 in total fixed costs and expects to sell 2,500 units their income would be $.
Required informationSkip to question[The following information applies to the questions displayed below.] Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 21,200Variable expenses 12,400Contribution margin 8,800Fixed expenses 6,952Operating income $ 1,84810. How many units must be sold to achieve a target profit of $5,324? (Do not round intermediate calculations.)
If a product has a selling price of $10, a contribution margin of $6 and fixed costs of $12 000, to make a profit of $36 000, the number of units that must be sold is:Group of answer choices4800.8000.12 000.2000.
The financial information of the company is as follows:Sales units: 200Price per unit: $30Fixed cost: $400Variable cost per unit: $20What would be the profit if 400 and 500 units are sold? Create a data table for the same.Options :$2,000 and $3,500$3,600 and $4,600$2,500 and $3,200$4000 and $6,500
A company expects to sell 400 units of Product X in January and expects sales to increase by 10% per month. If Product X sells for $10 each, the total sales for the first quarter of the year will be $.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.