Question

The Sundae

Ice Cream Shoppe sold 9500 servings of ice cream during June for $2 per serving. The shop purchases the ice cream in large tubs from the Georgia Ice Cream Company. Each tub costs the shop $7 and has enough ice cream to fill 20 ice cream cones. The shop purchases the ice cream cones for$ 0.25 each from a local warehouse club. Located in an outdoor mall, the rent for the shop space is $1,650 per month. The shop expenses $260

a month for the depreciation of the shop's furniture and equipment. During June, the shop incurred an additional$2,800of other operating expenses (75% of these were fixed costs).

Requirements

1.	Prepare TheSundaeIce Cream Shoppe's June income statement using a traditional format.
2.	Prepare TheSundae Ice Cream Shoppe's June income statement using a contribution margin format.

Answer 1

1	Traditional method	Amount
	Sales revenue 9500*2	19000
	Cost of goods sold
	Tubs 9500/20 = 475 *7	3325
	Cones cost 9500*.25	2375
	Total cost of goods sold	5700
	Gross profit	13300
	Operating cost
	Rent expense	1650
	Shop expense	260
	Other operaing expense	2800
	Total operating expense	4710
	Net operating income	8590
2	Contribution method	Amount
	Sales revenue 9500*2	19000
	Variable cost
	Tubs 9500/20 = 475 *7	3325
	Cones cost 9500*.25	2375
	Other operating expense 25% variable	700
	Total variable expense	6400
	Contribution margin	12600
	Fixed cost
	Shop rent	1650
	Shop expense	260
	Other operating expense 75%	2100
	Total fixed expense	4010
	Net operating income	8590