The Old Fashioned Ice Cream Shoppe sold 8,800 servings of ice cream during June
ID: 2410349 • Letter: T
Question
The Old Fashioned Ice Cream Shoppe sold 8,800 servings of ice cream during June for $ 4 per serving. The shop purchases the ice cream in large tubs from the Georgia Ice Cream Company. Each tub costs the shop $ 14 and has enough ice cream to fill 28 ice cream cones. The shop purchases the ice cream cones for $ 0.10 each from a local warehouse club. Located in an outdoor? mall, the rent for the shop space is $ 1,900 per month. The shop expenses $ 250 a month for the depreciation of the? shop's furniture and equipment. During? June, the shop incurred an additional $ 2,600 of other operating expenses ?(75?% of these were fixed? costs).
Requirements
Prepare the Old Fashioned Ice Cream Shoppe’s June income statement using a traditional format.
Prepare the Old Fashioned Ice Cream Shoppe’s June income statement using a contribution margin.
Explanation / Answer
The Old Fashioned Ice Cream Shoppe
Income Statement for the month of June using traditional Approach
Sales [8,800 Servings * $ 4 per serving] = $ 35,200
Cost of Goods Sold
Cost of Tub [8,800 Servings / 28 cones * $ 14 per tub] = $ 4,400
Cost of Cone [8,800 Servings * $ 0.1 per cone] = $ 880
Gross Profit / Margin = $ 29,920
Other Expenses
Shop Rent = $ 1,900
Depreciation = $ 250
Additional Operating Expenses = $ 2,600
Net Profit / Margin = $ 25,170
The Old Fashioned Ice Cream Shoppe
Income Statement for the month of June using Contribution margin Approach
Sales [8,800 Servings * $ 4 per serving] = $ 35,200
Variable Cost
Cost of Tub [8,800 Servings / 28 cones * $ 14 per tub] = $ 4,400
Cost of Cone [8,800 Servings * $ 0.1 per cone] = $ 880
Operating Expenses [2,600*25%] = $ 650
Contribution = $ 29,270
Fixed Cost / Expenses
Shop Rent = $ 1,900
Depreciation = $ 250
Operating Expenses [2,600*75%] = $ 1,950
Net Profit / Margin = $ 25,170
Note: Under Contribution Margin Approach, fixed cost and variable cost needs to be segregated, since Contribution = Sales minus Variable Cost.
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