Gravois, Inc., incurred the following costs during June: Selling expenses . . .
ID: 2349833 • Letter: G
Question
Gravois, Inc., incurred the following costs during June:Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $158,375
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,140
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,065
Manufacturing overhead, actual . . . . . . . . . . . . . . . . . . . . . . . . 204,750
Raw materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,980
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,000
d. (Optional) Prepare a traditional (absorption) income statement for Gravois, Inc., for the month of June. Assume that sales for the month were $1,035,000 and the company
Explanation / Answer
TRADITIONAL VERSUS CONTRIBUTION INCOME STATEMENT
Traditional Approach
(costs organized by function)
Contribution Approach
(costs organized by behavior)
Sales...........................
$60,000
Sales
$60,000
Less cost of goods sold*
34,000
Less variable expenses:
Gross margin................
26,000
Variable production....
$12,000
Less operating expenses:
Variable selling..........
3,000
Selling*......................
$15,000
Variable administrative
1,000
16,000
Administrative*...........
6,000
21,000
Contribution margin......
44,000
Net operating income.....
$ 5,000
Less fixed expenses:
Fixed production........
22,000
Fixed selling..............
12,000
Fixed administrative...
5,000
39,000
Net operating income...
$ 5,000
* Contains both variable and fixed elements since this is the income statement for a manufacturing company. If this were a merchandising company, then the cost of goods sold would be entirely variable.
Traditional Approach
(costs organized by function)
Contribution Approach
(costs organized by behavior)
Sales...........................
$60,000
Sales
$60,000
Less cost of goods sold*
34,000
Less variable expenses:
Gross margin................
26,000
Variable production....
$12,000
Less operating expenses:
Variable selling..........
3,000
Selling*......................
$15,000
Variable administrative
1,000
16,000
Administrative*...........
6,000
21,000
Contribution margin......
44,000
Net operating income.....
$ 5,000
Less fixed expenses:
Fixed production........
22,000
Fixed selling..............
12,000
Fixed administrative...
5,000
39,000
Net operating income...
$ 5,000
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