Answer:
1. Contribution format income statement for the next quarter.
Sales (43,000 units × $60 ) $2,580,000
Less Variable Costs
Cost of Goods Sold ( 43,000 units × $31 ) ($1,333,000)
Sales commissions (6% × 43,000 units × $60) ($154,800)
Shipping expense ( $4.00 × 43,000 units) ($172,000)
Contribution $920,000
Less Fixed Costs
Advertising expense $187,000
Shipping expense $45,000
Administrative salaries $97,000
Insurance expense $10,700
Depreciation expense $67,000 ($406,700)
Net Income/ (Loss) $513,300
2. Traditional format income statement for the next quarter.
Sales (43,000 units × $60 ) $2,580,000
Less Cost of Goods Sold ( 43,000 units × $31 ) ($1,333,000)
Gross Profit $1,247,000
Less Expenses
Advertising expense $187,000
Shipping Expense :
Variable Shipping expense $172,000
Fixed Shipping expense $45,000
Administrative salaries $97,000
Insurance expense $10,700
Sales commissions $154,800
Depreciation expense $67,000 ($733,500)
Net Profit / (Loss) $513,500
Explanation:
The contribution format income statement shows the Contribution instead of Gross Profit. Contribution is calculated as Sales less all Variable Costs.
The traditional format income statement shows the Gross Profit instead of Contribution. Gross Profit is calculated as Sales less Cost of Goods Sold.
