Home Entertainment is a small, family-owned business that purchases LCD televisi

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 $1,580 each. The average cost of a television from the manufacturer is $1,050.

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

  

  

  

Prepare an income statement for April using the traditional format with costs organized by function.

Prepare an income statement for April, this time using the contribution format with costs organized by behaviour. Show costs and revenues on both a total and a per unit basis down through contribution margin.

      

      

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 $1,580 each. The average cost of a television from the manufacturer is $1,050.

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

Explanation / Answer

COGS

COGS ($1050 per TV)

1 Prepare an income statement for April using the traditional format with costs organized by function. Sales $ 366560 (232 tv*1580$)

COGS

$ 243600 (232 tv*1050$) Gross Margin (A) $ 122960 Selling and Administrative Expenses: $   Selling: $      Advertising $ 1,145      Delivery of televisions $ 9744 (42*232tv)      Sales salaries and commissions (Fixed) $ 3,500      Sales salaries and commissions (Variable) $ 18,328 (5%*366560)      Utilities $ 480 per month      Depreciation of sales facilities $ 3,080 per month Total Selling Expense (B) $ 36,277   Administrative: $      Executive salaries $ 11,800 per month      Depreciation of office equipment $ 530 per month      Clerical (Fixed) $ 2,020      Clerical (Variable) $ 13,224 ( $57 per television sold)      Insurance $ 780 per month Total Admn Expense © $ 28,354 Net Operating Income (A-B-C) $ 58,329 2 Prepare an income statement for April, this time using the contribution format with costs organized by behaviour. Show costs and revenues on both a total and a per unit basis down through contribution margin. Total Total Per unit Per unit Sales     366,560.00    1,580.00 Variable Expenses:

COGS ($1050 per TV)

     243,600.00         1,050.00 Delivery of televisions ($42/TV)          9,744.00               42.00 Sales salaries and commissions (5% of sales)        18,328.00               79.00 Clerical ( $57 per television sold)        13,224.00     284,896.00               57.00    1,228.00 Contribution        81,664.00       352.00 Fixed Expense      Advertising        1,145.00                 4.94      Sales salaries and commissions (Fixed)        3,500.00               15.09      Utilities          480.00                 2.07      Depreciation of sales facilities        3,080.00               13.28      Executive salaries      11,800.00               50.86      Depreciation of office equipment          530.00                 2.28      Clerical (Fixed)        2,020.00                 8.71      Insurance          780.00        23,335.00                 3.36       100.58 Ne Operating Income        58,329.00       251.42

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