Question

Traditional and Contribution Format Income Statement [LO3]
Haaki Shop Inc. is a large retailer of surfboards. The company assembled the information shown below for the quarter ended May 31:

Amount

Total sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000

Selling price per surfboard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400

Variable selling expense per surfboard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Variable administrative expense per surfboard . . . . . . . . . . . . . . . . . . . . . . . . . 20

Total fixed selling expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150,000 . .

Total fixed administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000

Merchandise inventory, beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000

Merchandise inventory, ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000

Merchandise purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .320,000

Required:

Prepare a traditional income statement for the quarter ended May 31.

Prepare a contribution format income statement for the quarter ended May 31.

What was the contribution toward fixed expenses and profits for each surfboard sold dur-

ing the quarter? (State this figure in a single dollar amount per surfboard.)

Answer 1

Units sold = 800000/400 = 2000
1
	Traditional Income Statement
Sales		800000
Cost of goods sold		300000	=80000+320000-100000
Gross margin		500000
Selling and administrative expenses:
Selling expenses	250000		=150000+(2000*50)
Administrative expense	160000		=120000+(2000*20)
		410000
Net operating income		90000
2
	Contribution Format Income Statement
Sales		800000
Variable expenses:
Cost of goods sold	300000
Selling expenses	100000		=2000*50
Administrative expense	40000		=2000*20
		440000
Contribution margin		360000
Fixed expenses:
Selling expenses	150000
Administrative expense	120000
		270000
Net operating income		90000
3
Contribution of each surfboard = 360000/2000= $180