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 $1,700 each. The average cost of a television from the manufacturer is $1,260.

Home Entertainment has always kept careful accounting records, and the costs that it incurs in a typical month are as follows:

Costs	Cost Formula
Selling:
Advertising	$	1,345	per month
Delivery of televisions	$	40	per television sold
Sales salaries and commissions	$	3,320	per month, plus 2% of sales
Utilities	$	422	per month
Depreciation of sales facilities	$	3,830	per month
Administrative:
Executive salaries	$	8,750	per month
Depreciation of office equipment	$	860	per month
Clerical	$	1,530	per month, plus $54 per television sold
Insurance	$	520	per month

During April, the company sold and delivered 207 televisions.

Required: 1. Prepare an income statement for April using the traditional format with costs organized by function. HOME ENTERTAINMENT Traditional Income Statement For the Month Ended April 30 Selling and administrative expenses Selling expenses: Total selling expenses Administrative expensos Total administrative expenses Total selling and administrative expenses

Answer 1

351900 260820 91080 HOME ENTERTAINMENT Traditional Income Statement For the Month Ended April 30 sales Revneue (207*1700) Cost of Goods Sold (207*1260) Gross Margin selling and Administrative Expenses Selling Expenses Advertising 1345 Sales Salaries and Commission 10358 Delivary of Televisions 8280 Utilities 422 Depreciation of Sales facilities 3830 Total Selling Expenses 24235 Administrative Expenses Executive Salaries 8750 Insurance Expenses 520 Clerical 12708 Depreciaiton of Office Equipment 860 Total Administrative Expenses 22838 Total Selling and Administrative Expenses Net operating income 47073 44007

Per Unit 1700 12601 1388 HOME ENTERTAINMENT Contribution Formate Income Statement For the Month Ended April 30 Total sales Revneue (207*1700) 351900 Varaible Expenses Cost of Goods Sold (207*1260) 260820 Sales Salaries and Commission 7038 Delivary of Televisions 8280 Clerical 11178 Total Variable Expenses 287316 Contribution Margin 64584 Fixed Expenses Advertisements 1345 Sales Salaries and Commission 3320 Utilities 422 Depreciaiton of Office Equipment 3830 Depreciaiton of sales Facilities 860 Execitive Slaries 8750 Insurance 5201 Clarical 1530 Total Fixed Cost 20577 Net operating Income 44007 312