Question

Home Entertainment is a small, family-owned business that purchases LCD televisions from a reputable manufacturer and sells them at the retail level. The televisions sell, on average, for $2,470 each. The average cost of a television from the manufacturer is $1,900. Home Entertainment has always kept careful accounting records, and the costs that it incurs in a typical month are as follows: Cost Formula is it is Costs Selling: Advertising Delivery of televisions Sales salaries and commissions Utilities Depreciation of sales facilities Administrative: Executive salaries Depreciation of office equipment clerical Insurance $ 1,160 per month $ 52 per television sold $ 2,800 per month, plus 10% of sales $ 488 per month $ 3,700 per month $ 9,050 per month $ 545 per month $ 1,700 per month, plus $40 per television sold 810 per month During April, the company sold and delivered 215 televisions. Required: 1. Prepare an income statement for April using the traditional format with costs organized by function.

Answer 1

Solution

HOME ENTERTAINMENT
Traditional Income Stetement
For the month ending April 30
Sales revenue		$   5,31,050.00
Less: Cost of Goods sold		$   4,08,500.00
Gross Profit		$   1,22,550.00
Selling and Administrative Expenese
Selling Expenses
Advertising	$          1,160.00
Sales salaries and Commission	$       55,905.00
Delivey Expense	$       11,180.00
Utilities	$             488.00
Depreciation of sales facility	$          3,700.00
Total Selling Expenses	$       72,433.00
Administrative Expenses
Executive Salaries	$          9,050.00
Insurance	$             545.00
Clerical	$       10,300.00
Depreciation- Office Equipment	$             810.00
Total Administrative expenses	$       20,705.00
Total Selling and Administrative Expense		$       93,138.00
Net income		$       29,412.00

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HOME ENTERTAINMENT
Contribution formal Income statement
For the month ending April 30
	Total	Per Piano
Sales	$    5,31,050.00	$         2,470.00
variable Expenses
Direct material cost	$    4,08,500.00	$         1,900.00
Variable Sales salaries and Commission	$       53,105.00	$             247.00
Delivery Expenses	$       11,180.00	$               52.00
Clerical	$          8,600.00	$               40.00
Total Variable Cost	$    4,81,385.00	$         2,239.00
Contribution Margin	$       49,665.00	$             231.00
Fixed costs
Advertising	$          1,160.00
Fixed Sales salaries and Commission	$          2,800.00
Utilities	$             488.00
Depreciation- Sales Facility	$          3,700.00
Executive salaries	$          9,050.00
Insurance	$             545.00
Clerical fixed cost	$          1,700.00
Depreciation- Office equipment	$             810.00
Total Fixed cost	$       20,253.00
Net Income	$       29,412.00