Question

Problem D2-25 (Part Level Submission)

J Crane, Ltd. is a local coat retailer. The store’s accountant prepared the following income statement for the month ended January 31:

Sales revenue					$	750,000
Cost of goods sold						300,000
Gross margin						450,000
Operating expenses
Selling expense		$	23,560
Administrative expense			49,500			73,060
Net operating income					$	376,940

Crane sells its coats for $250 each. Selling expenses consist of fixed costs plus a commission of $6.50 per coat. Administrative expenses consist of fixed costs plus a variable component equal to 5% of sales

Prepare a contribution format income statement for January.​

Answer 1

	J. Crane Ltd.
	Income statement
	For the month ended January 31
	Sales		$ 7,50,000
Less:	Variable cost of goods sold		$ 3,00,000
	Gross contribution margin		$ 4,50,000
Less:	Variable selling expense (3,000 coats X $6.5)	$ 19,500
Less:	Variable administrative expense (7,50,000 X 5%)	$ 37,500	$     57,000
	Contribution margin		$ 3,93,000
Less:	Fixed selling expense ($23,560 - $19,500)	$   4,060
Less:	Fixed administrative expense ($49,500 - $37,500)	$ 12,000	$     16,060
	Net operating Income		$ 3,76,940
	Number of coats sold	=	Total sales / selling price per unit
		=	$7,50,000 / $250 per peice
		=	3,000