Lo 4: Prepare a Contribution Income Statement 6-15. Fresh Baked Cookie Company s

Question

Lo 4: Prepare a Contribution Income Statement

6-15. Fresh Baked Cookie Company sells cookies in a Large shopping mall. The following multiple-step income statement was prepared for the year ending December 31, 2008.

Fresh Baked Cookie Company

sales $36,000

Cost of Goods Sold $ 4,000

Gross Profit $32,000

Operating Expenses:

Sellign Expenses $18,000

Administrative Expenses $10,000 $ 28,000

Operting Income $4,000

Cost of goods sold is a variable cost. selling ecpense is 20% variable and 80% fixed,and administrative ecpense is 5% variable and 95% fixed.

Explanation / Answer

sales $36,000

Less: Variable Expenses

Cost of Goods Sold $ 4,000

Selling Expenses $3600

Administrative Expenses $500

Contribution Income = $27,900

Less: Fixed Cost

Selling Expenses $14400

Administrative Expenses $9500

Net Income = $4000

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