Question

Plyler Enterprises sells garage doors in Erie, PA and has provided the following information:

# of units sold                                     15,000

Average selling price                          $25 per unit

Variable selling expense                     $5 per unit

Variable administrative expense         $2.50 per unit

Fixed selling expenses                        $50,000

Fixed Administrative expenses          $30,000

Inventory at beginning                        $32,000

Inventory at end                                  $50,000

Inventory purchases                            $152,000

1. Provide the figures for the TRADITIONAL income statement below for Plyler Enterprises (ignore taxes):

Account	Amount	Show Calculations
Sales
Cost of goods sold
Gross margin		Sales less cost of goods sold
Selling expenses
Administrative expenses
Net operating income		Gross margin less Selling and Administrative

2. Provide the figures for the CONTRIBUTION FORMAT income statement below for Plyler Enterprises (ignore taxes):

Account	Amount	Show Calculations
Sales
Variable expenses:
Cost of goods sold
Selling expenses
Administrative exp.
Contribution margin		Sales less variable expenses
Fixed expenses:
Selling expenses
Administrative exp.
Net operating income		Sales less variable and fixed expenses

Answer 1

• Working for Cost of Goods Sold

Inventory at beginning	$                         32,000.00
Inventory Purchases	$                      152,000.00
Inventory at end	$                      (50,000.00)
Cost of Goods Sold	$                      134,000.00

• Requirement 1

Account	Amount	Show Calculations
Sales	$                      375,000.00	[15,000 units x $ 25]
Cost of goods sold	$                      134,000.00	[Calculated above]
Gross margin	$                      241,000.00	Sales less cost of goods sold [ 375000 - 134000]
Selling expenses	$                      125,000.00	[ (15000 units x $5) + $50000]
Administrative expenses	$                         67,500.00	[ (15000 units x $2.5) + $30000]
Net operating income	$                         48,500.00	Gross margin less Selling and Administrative [241000 - 125000 - 67500]

• Requirement 2

Account	Amount	Show Calculations
Sales	$                      375,000.00	[15,000 units x $ 25]
Variable expenses:
Cost of goods sold	$                     134,000.00	[Calculated above]
Selling expenses	$                         75,000.00	[15000 units x $5]
Administrative exp.	$                         37,500.00	[15000 units x $2.5]
Contribution margin	$                      128,500.00	Sales less variable expenses
Fixed expenses:
Selling expenses	$                         50,000.00
Administrative exp.	$                         30,000.00
Net operating income	$                         48,500.00	Sales less variable and fixed expenses