Cost Behavior Prepare income statement in two formats Farnsworth Drycleaners has

ID: 2553436 • Letter: C

Question

Cost Behavior

Prepare income statement in two formats

Farnsworth Drycleaners has capacity to clean up to 7,500 garments per month. The following operating data is available for Farnsworth.

Amount charged per garment for dry cleaning: $10.00

Variable cost per garment: $0.70

Fixed costs per month: $14,400

Use the blue shaded areas on the ENTERANSWERS tab for inputs.

Always use cell references and formulas where appropriate to receive full credit. If you copy/paste from the Instruction tab you will be marked wrong.

Requirements

1- Using the traditional format, prepare Farnsworth’s projected income statement for July assuming 4,260 garments are cleaned during the month.

a. Check your spelling carefully and do not abbreviate.

b. Enter all amounts as positive values. Do not use a minus sign or parentheses for any values to be subtracted.

2- Using the contribution margin format, prepare Farnsworth’s projected income statement for July assuming 4,260 garments are cleaned during the month.

a. Check your spelling carefully and do not abbreviate.

b. Enter all amounts as positive values. Do not use a minus sign or parentheses for any values to be subtracted.

Explanation / Answer

Answer

Working

Fixed Cost per month

$14400

Capacity [garments]

7500

Fixed cost per garment

$1.92

Variable cost per garment

$0.7

Total cost to produce one garment

$2.62

Income Statement

Amount ($)

Working

Sales Revenue

42600

[4260 garments x $10]

(-) Cost of Goods Sold

11161.2

[4260 garments x $2.62]

Gross Profit

31438.8

(-) Expenses

No info

[not given]

Net operating Income

$31438.8

Amount ($)

Working

Sales Revenue

42600

[4260 garments x $10]

(-) Variable cost

2982

[4260 x $0.7]

Contribution margin

39618

(-) Fixed Cost

14400

[total given]