Question

Precious Pets is a specialty pet gift shop selling exotic pet-related items online. The shop has no physical location. Results for last year are shown next: (Click the icon to view the results.) For internal planning and decision-making purposes, the owner of Precious Pets would like to translate the company's income statement into the contribution margin format. Since Precious Pets is online only, all of its cost of goods sold is variable. A large portion of the selling and marketing expenses consists of freight-out charges ($20,800), which were also variable. Only 20% of the remaining selling and marketing expenses and 25% of the website expenses were variable. Of the other operating expenses, 90% were fixed. Based on this information, prepare Precious Pets' contribution margin income statement for last year.

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Answer 1

1,014,000 Less Precious Pets Contribution format Income Statement For The Year Ended December 31 Sales Revenue Variable Expenses Cost of Goods Sold Variable Selling & marketing Expenses Variable website maintenance Other Variable Operating Expenses Contribution Margin Fixed Expenses Fixed Selling & marketing Expenses Fixed website maintenance Other Fixed Operating Expenses Operating Income 669,000 29,340 14,875 1,880 298,905 Less 34,160 44,625 16,920 203,200 Working: Variable Selling & marketing Expenses Variable website maintenance Other Variable Operating Expenses Fixed Selling & marketing Expenses Fixed website maintenance Other Fixed Operating Expenses 20800 +(63500 - 20800) x 20%) 59500 x 25% 18800 x 10% 63500 - 29340 59500 x 75% 18800 x 90%