Problem D2-25 (Part Level Submission) J Crane, Ltd. is a local coat retailer. Th

Question

Problem D2-25 (Part Level Submission)

J Crane, Ltd. is a local coat retailer. The store’s accountant prepared the following income statement for the month ended January 31:

Crane sells its coats for $250 each. Selling expenses consist of fixed costs plus a commission of $6.50 per coat. Administrative expenses consist of fixed costs plus a variable component equal to 5% of sales

Prepare a contribution format income statement for January.

Sales revenue $ 750,000 Cost of goods sold 300,000 Gross margin 450,000 Operating expenses   Selling expense $ 23,560   Administrative expense 49,500 73,060 Net operating income $ 376,940

Explanation / Answer

J. Crane Ltd. Income statement For the month ended January 31 Sales $ 7,50,000 Less: Variable cost of goods sold $ 3,00,000 Gross contribution margin $ 4,50,000 Less: Variable selling expense (3,000 coats X $6.5) $ 19,500 Less: Variable administrative expense (7,50,000 X 5%) $ 37,500 $     57,000 Contribution margin $ 3,93,000 Less: Fixed selling expense ($23,560 - $19,500) $   4,060 Less: Fixed administrative expense ($49,500 - $37,500) $ 12,000 $     16,060 Net operating Income $ 3,76,940 Number of coats sold = Total sales / selling price per unit = $7,50,000 / $250 per peice =            3,000

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