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 $2,250 each. The average cost of a television from the manufacturer is $1,340.

     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 $2,250 each. The average cost of a television from the manufacturer is $1,340.

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

Explanation / Answer

Solution:

Traditional Income Statement - Home Entertainment Particulars Details Amount Sales (210*2250) $472,500.00 Less: Cost of Goods Sold (210*1340) $281,400.00 Gross Profit $191,100.00 Sellling Expenses: Advertising $1,135.00 Delivery of Television(210*45) $9,450.00 Sales Salaries and Commissions (3070 + 4% of 472500) $21,970.00 Utilities $460.00 Depreciation of Sales Facilities $3,660.00 $36,675.00 Administrative Expenses: Executive Salaries $9,550.00 Depreciation of office equipment $520.00 Clerical (1660 + 210*41) $10,270.00 Insurance $480.00 $20,820.00 Net Income $133,605.00

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