Question

Exercise 2-14 Complete each of the following contribution format income statements by supplying the missing numbers. a. b. C. d. Sales revenue Variable expenses Contribution margin Fixed expenses Operating income Income taxes $535,204 s $635,992 242,148 107,312 141,356 177,496 498,616 99,376 135,172 18,924 23,436 23,938 60,958 Net income $13,247 $71,814 $182,874

Answer 1

Solution

Part 1:

Filling missing numbers in the given Contribution format income statements:

	a.	b.	c.	d.
Sales Revenue	$383,504	$535,204	$338,236	$635,992
Variable expenses	$242,148	$357,708	$107,312	$137,376
Contribution margin	$141,356	$177,496	$230,924	$498,616
Fixed expenses	$122,432	$99,376	$135,172	$254,784
operating income	$18,924	$78,120	$95,752	$243,832
income taxes	$5,677	23,436	$23,938	$60,958
Net Income	$13,247	$54,684	$71,814	$182,874

The missing amounts are arrived at by using the CVP relationship as shown by the given formula,

Contribution Margin = sales – variable cost

Hence, sales = variable cost + contribution margin

Contribution margin – fixed expenses = operating income

Operating income – income taxes = Net Income

Part 2:

Robinson Company

Contribution Format Income Statement:

Contribution Format Income Statement
			per unit
Sales		$11,350	$5
Less: Variable expenses:
Cost of goods sold	$3,405		$1.50
Variable operating expenses	$908		$0.40
total variable cost		$4,313	$1.90
Contribution margin		$7,037	$3.10
Less: Fixed operating expenses		$1,625
operating income		$5,412

Notes:

Number of units = $11,350/$5 = 2,270

Variable operating cost per unit = $0.40

Variable operating cost = $0.40 x 2,270 = $908

Fixed operating cost = $2,533 - $908 = $1,625