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 $2,290 each. The average cost of a television from the manufacturer is $1,400. Home Entertainment has always kept careful accounting records, and the costs that it incurs in a typical month are as follows: Costs Cost Formula Selling: Advertising $ 1,400 per month Delivery of televisions $ 42 per television sold Sales salaries and commissions $ 3,090 per month, plus 10% of sales Utilities $ 550 per month Depreciation of sales facilities $ 3,170 per month Administrative: Executive salaries $ 8,600 per month Depreciation of office equipment $ 960 per month Clerical $ 1,790 per month, plus $41 per television sold Insurance $ 710 per month During April, the company sold and delivered 190 televisions. Required: 1. Prepare an income statement for April using the traditional format with costs organized by function. 2. 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.

Explanation / Answer

1.

2.

Particulars Total Sales        4,35,100 Selling expenses Advertising               1,400 Delivery of televisions             7,980 Sales salaries             3,090 Sales commission           43,510 Depreciation of sales facilities             3,170 Total selling expense           59,150 Adminstration expenses Utilities                 550 Executive salaries             8,600 Depreciation of office equipment                 960 Clerical $ 1,790 per month, plus $41 per television sold             9,580 Insurance                 710 Total administrative expense           20,400 Total selling and administrative expense           79,550 Net income        3,55,550

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