In August, Clarey Corporation, a manufacturing company, reported the following f
ID: 2388898 • Letter: I
Question
In August, Clarey Corporation, a manufacturing company, reported the following financial data:Sales - $260,000
Variable Production expense - 47000
Fixed production expense- 40000
variable selling expense- 26000
Fixed Selling expense- 43000
Variable administrative expense 29000
Fixed administrative expense- 69000
The company had no beginning or ending inventories.
A) Prepare an income statement in good form for August using the traditional approach.
B) Prepare an income statement in good form for August using the contribution approach.
Explanation / Answer
A) Prepare an income statement in good form for August using the traditional approach. Ans:- sales-$260000 less-variable production expenses-$47000 less-Fixed production expense- $40000 GROSS INCOME-(260000-47000-40000)=$173000 Gross income-173000 less-variable selling expense- 26000 less-Fixed Selling expense- 43000 less-Variable administrative expense- 29000 less-Fixed administrative expense- 69000 NET INCOME=$6000 B) Prepare an income statement in good form for August using the contribution approach. CONTRIBUTION=SALES-VARIABLE EXPENSES NET INCOME=CONTRIBUTION-FIXED COST sales-$260000 less-variable production expenses-$47000 less-variable selling expense- 26000 less-Variable administrative expense- 29000 CONTRIBUTION=(260000-47000-26000-29000)=158000 less-Fixed production expense- 40000 less-Fixed Selling expense- 43000 less-Fixed administrative expense- 69000 NET INCOME=(158000-40000-43000-69000)=$6000