Question

Fanelli Corporation, a merchandising company, reported the following results for July:

Number of units sold		6,400
Selling price per unit	$	600
Unit cost of goods sold	$	416
Variable selling expense per unit	$	56
Total fixed selling expense	$	125,900
Variable administrative expense per unit	$	24
Total fixed administrative expense	$	207,800

Cost of goods sold is a variable cost in this company.

Required:

a. Prepare a traditional format income statement for July.

b. Prepare a contribution format income statement for July.

Answer 1

Solution

Fanelli Corporation
Traditional Format Income Statement
Sales		$      3,840,000
Cost of goods sold		$      2,662,400
Gross margin		$      1,177,600
Selling expenses:	$       484,300
Administrative expenses:	$       361,400
Total selling and administrative expenses		$         845,700
Net operating income		$            331,900

.

Fanelli Corporation
Contribution margin Income statement
Sales		$         3,840,000
Less: Variable costs
Variable cost of goods sold	$       2,662,400
Variable selling expense	$           358,400
Variable administrative expenses	$           153,600
Total Variable cost		$         3,174,400
Contribution margin		$            665,600
Less: Fixed Costs
Fixed selling expenses	$           125,900
Fixed administrative expenses	$           207,800
Total Fixed Costs		$            333,700
Net Income		$            331,900