Question

Price Dry Cleaners has capacity to clean up to 9,000 garments per month : (Click the icon to view the cost schedule.) Assume that Price charges customers $7 per garment for dry cleaning. Prepare Price's projected income statement if 4,220 garments are cleaned in March. First, prepare the income statement using the traditional format; then, prepare Price's contribution margin income statement. Begin by preparing the projected income statement using the traditional format. Price Dry Cleaners Projected Income Statement Month Ended March 31 Sales commissions 29540 Less: Operating costs 16032 13508 Operating income (loss) Dry cleaning revenue Gross profit Less: Fixed costs Less: Operating costs Less: Variable costs Operating income (loss) Payroll costs Sales commissions Data Table 6,000 7,500 9,000 Total variable costs Total fixed costs Garments Garments Garments $ 3,600 $ 4,500 $ 5,400 13,500 13,500 13,500 $ 17,100 $ Total operating costs 18,900 18,000 $ $ 0.60 $ 0.60 Variable cost per garment Fixed cost per garment 0.60 $ 2.25 1.80 1.50 $ 2.85 $ 2.40 $ 2.10 Average cost per garment Print Done

Answer 1

Traditional Method Price Dry Cleaners Projected Income Statement Month Ended March 31 Dry cleaning revenue $ Less: Operating costs $ Operating Income $ 4220*$7 29,540 16,032 13,508 Operating Costs Variable Costs Fixed Costs 4220*$0.60 $ $ $ 2,532 13,500 16,032 Contribution Margin Income Statemet Price Dry Cleaners Projected Income Statement Month Ended March 31 Dry cleaning revenue $ Less: Variable Costs $ Contribution Margin $ Less: Fixed Costs $ Operating Income $ 29,540 2,532 27,008 13,500 13,508

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