Question

Coverall Inc. produces and sells a unique type of case for a standard-size tablet computer that is guaranteed waterproof but still allows for regular functionality of the tablet. The company has just opened a new plant to manufacture these cases, and the following cost and revenue data have been provided for the first month of the plant’s operation in the form of a worksheet:

Beginning inventory		0
Units produced		20,000
Units sold		15,000
Selling price per unit	$	80
Selling and administrative expenses:
Variable per unit	$	6
Fixed (total)	$	475,000
Manufacturing costs:
Direct materials cost per unit	$	12
Direct labour cost per unit	$	9
Variable manufacturing overhead cost per unit	$	5
Fixed manufacturing overhead cost (total)	$	600,000

Since the new case is unique in design, management is anxious to see how profitable it will be and has asked that an income statement be prepared for the month.

Prepare a contribution format income statement for the month. (Do not leave any empty spaces; input a 0 wherever it is required.)

Answer 1

Coverall Inc.
Contribution format Income Statement
	Total	Per Tablet
Sales Revenue	1,200,000	80
Variable Expenses
Direct Material	180,000	12
Direct Labor	135,000	9
Variable overhead	75,000	5
Selling and admin expense	90,000	6
Total Variable Expense	480,000	32
Contribution margin	720,000	48
Fixed Expense:
Fixed manufacturing Overhead	600,000
Selling and admin expense	475,000
Total Fixed Expeses	1,075,000
Net Operating Income	(355,000)