Question

16-21A (similar to) tion Help Petrov Drycleaners has capacity to clean up lo 12.000 garments per month Click the loon to view the cost schedule.) Assume that Petrov charges customers 511 per garment for dry cleaning. Prepare Patro'propered income statement 4,200 garments are cleaned in March. Fral, prepare the income semening the a format the prepare Petrov's contribution margin income statement nal Begin by preparing the projected income statement using the traditional format ( Pound your answers to the nearest Wholesar. Enter losses with parentheses or a minua sign) Petrov Drycleaners Projected Income Statement Reference Month Ended March 31 Dry cleaning revenue Total variable costs Totalfoed costs 9,000 10.500 12,000 Garments Garments Garments 8,100 $ 9,450 $ 10,800 25.200 25.200 25,200 $ 33,300 $ 34,650 $ 36.000 Total operating costs Gross profit Operating costs Operating income foss) Payrol costs Sales commissions Variable costs Variable cost per garment $ 0.00 $ 2.80 0.00 $ 2.40 3.30 $ 0.90 2.10 3.00 Average cost per garment 3.70 $ Print Done Choose from any list or enter any number in the input fields and then click Check Answer

Answer 1

C Е F G н Important Point to be read before doing the problem: 1 The main difference between the two approaches is that under the traditional method the inventory is valued at the total cost incurred as opposed to the contribution margin method where the inventory is valued at variable cost. Therefore, the inventory cost in traditional method will include both variable as well as fixed costs. In the contribution margin method, the inventory cost vwill include only variable cost 2 Income Statement as per Traditional Method Income Statement as per Contribution Margin method 6 Calculations 4260 garments * $11 Refer working note 1 SI No Particulars 7 SI No Particulars Amount Calculations Amount (S) 1 Sales $46,860 4260 garments S11 2 Less: Variable cost 4260 garments $0.90 $46,860 8 1 Sales 2 Less: Cost of Goods Sold 3 Gross Profit (1-2) 4 Less: Operating Expenses $29,034 $3,834 $17,826 $43,026 10 3 Contribution 4 Less: Fixed Cost $25,200 11 0 $17,826 $17,826 12 5 Net Profit 5 Operating Profit 13 14 There is no difference in the profit calculated by using both the methods because there is no opening or closing stock. If there were opening and 15 16 Working Notes 17 18 Note No 1: Cost of goods sold 19 20 Variable cost $0.90 per unit *4260 garments S3,834 Fixed cost (the total fixed cost 21 is same for all production $25,200 Cost of goods sold $29,034 22 23 As explained in the important point, the inventory cost includes both variable cost and fixed cost 24 m unuo a