Question

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

Number of units sold		6,200
Selling price per unit	$	600
Unit cost of goods sold	$	414
Variable selling expense per unit	$	52
Total fixed selling expense	$	125,700
Variable administrative expense per unit	$	30
Total fixed administrative expense	$	207,600

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

[a]

Fanelli Corporation
For the month of July
Traditional Income Statement
Sales		$3,720,000
Cost of goods sold		$2,566,800
Gross margin		$1,153,200
Selling and administrative expenses:
Administrative expense-Variable	$186,000
Selling expense-Variable	$322,400
Administrative expense-Fixed	$207,600
Selling expense-Fixed	$125,700	$841,700
Net operating income		$311,500

[b]

Fanelli Corporation
For the month of July
Contribution Format Income Statement
Sales		$3,720,000
Variable expenses:
Cost of Goods Sold	$2,566,800
Selling expense	$322,400
Administrative expense	$186,000
Total variable expense		$3,075,200
Contribution margin		$644,800
Fixed expenses:
Selling expense	$125,700
Administrative expense	$207,600
Total Fixed expense		$333,300
Net Operating income		$311,500