Question

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

Number of units sold		6,800
Selling price per unit	$	610
Unit cost of goods sold	$	420
Variable selling expense per unit	$	64
Total fixed selling expense	$	126,300
Variable administrative expense per unit	$	32
Total fixed administrative expense	$	208,200

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

Answer-a)-

FANELLI CORPORATION
Traditional Income statement
For the month ended July
Particulars			Amount
			$
Sales	6800 units*$610 per unit		4148000
Less:- Cost of goods sold
Variable	6800 units*$420 per unit		2856000
Gross profit			1292000
Less- Operating expenses
Administrative expense	(6800 units*$32 per unit)+$208200		425800
Selling expense	(6800 units*$64 per unit)+$126300		561500
Net Income			304700

b)-

FANELLI CORPORATION
Contribution Format Income statement
For the month ended July
Particulars			Amount
			$
Sales	6800 units*$610 per unit		4148000
Less:- Variable cost-
Cost of goods sold	6800 units*$420 per unit		2856000
Selling expense	6800 units*$64 per unit		435200
Administrative expense	6800 units*$32 per unit		217600
Contribution margin			639200
Less- Fixed costs			334500
Selling expense	126300
Administrative expense	208200
Net Income			304700