Question

The following is the income statement for Daisy’s Day Care Limited for the month ended March 31, 2020: Daisy’s Day Care Limited Income Statement Month Ended March 31, 2020

Revenue $ 20,000

Expenses: Food 6,000

Heat and lights 800

Office Supplies 200

Childcare supplies 1,000

Wages 8,000

Total expenses 16,000

Operating income $ 4,000

20% of the childcare supplies and 25% of the wages are fixed while the remaining amounts are variable. 100% of the food expense is variable.

Required: Based on the above information what would the operating income for the month ended March 31, 2020 be if the income statement was prepared using the contribution margin approach?

Answer 1

Answer:
Particulars	Amount (in $)	Amount (in $)
Sales Revenue		$ 20,000
Less: variable Costs / Expenses
- Food ( 100% Variable)	$ 6,000
- Heat and Lights	$ 800
- Office Supplies	$ 200
- Childare Supplies ( 80% Variable)            ( $ 1,000 x 80%)	$ 800
-   Wages ( 75% Variable)              ( $8,000 x 75%)	$ 6,000
Total Variable Costs / Expenses		($13,800)
Contribution Margin		$ 6,200
Less: Fixed Costs / Expenses
- Childare Supplies ( 20% Variable)            ( $ 1,000 x 20%)	$ 200
-   Wages ( 25% Variable)              ( $8,000 x 25%)	$ 2,000
Total Fixed Costs / Expenses		( $2,200)
Net Operating Income		$ 4,000