Question

Jean's Fitness Club provides monthly memberships as well as personal training sessions. The personal trainers earn 50% of the revenue for all personal training sessions. The Fitness Club also sells nutrition products. Jean's general ledger accounts indicate the following for the year. The front desk staff wages expense remains the same throughout the year.

Account	Amount	Account	Amount
Membership revenue	$142,000	Personal trainer wages expense	?
Personal training revenue	$77,000	Space rental expense	$11,000
Product sales	$67,000	Straight line depreciation expense	$6,000
Cost of product sold	$37,000	Rental insurance expense	$3,000
Front desk staff wages expense	$17,000	​	​

If a contribution margin income statement is prepared for the year, what is operating income?

		$398,500
		$210,500
		$286,000
		$173,500

Answer 1

Operating Income = $ 1,73,500

Main Answer:

Income Statement

Sr. No	Particular	Amount	Working Note No
(i)	Total Revenue	$       2,86,000	4
(ii)	Total Variable Expenses	$          92,500	2
(iii)	Total Contribution [(i)-(ii)]	$       1,93,500	-
(iv)	Total Fixed Cost	$          20,000	3
	Operating Income [(iii)-(iv)]	$      1,73,500	-

Working Notes:

1.

Calculation of Personal trainer wages expense:

The personal trainers earn 50% of the revenue for all personal training sessions.

Personal trainer wages expense = Personal training revenue* 50%

   = $ 77,000 * 50%

= $ 38,500

2.

Total Variable Cost:

Expenses	Amount
Personal trainer wages expense	$          38,500
Cost of Goods sold	$          37,000
Front desk staff wages expense	$          17,000
TOTAL VARIABLE COST	$          92,500

3.

Total Fixed Expenses

Expenses	Amount
Space rental expense	$          11,000
Depreciation expenses	$            6,000
Rental insurance	$            3,000
TOTAL FIXED COST	$          20,000

4.

Total Revenue & Sales:

Particular	Amount
Membership revenue	$       1,42,000
Personal training revenue	$          77,000
Product sales	$          67,000
Total Revenue & Sales	$      2,86,000