Precious Pets is a small etail business specializing in the sale of exotic pet gifts and accessories over the web. The business is owned by a sole proprietor and operated out of her home. Results for last year are as follows:

For internal planning and decision-making purposes, the owner of Precious Pets would like to translate the company€™s income statement into the contribution margin format. Since Precious Pets is an etailer, all of its cost of goods sold was variable. A large portion of the selling and marketing expenses consisted of freight-out charges ($19,000), which were also variable. Only 20% of the remaining selling and marketing expenses and 25% of the website expenses were variable. Of the other operating expenses, 90% were fixed.
Based on this information, prepare Precious Pets€™ contribution margin income statement for last year.

Transcribed Image Text:

PRECIOUS PETS Income Statement Year Ended December 31 Sales revenue Cost of goods sold.. Gross profit Operating expenses: 987,000 (665,000) 322,000 Selling and marketing expense. Website maintenance expenses Other operating expenses $61,000 56,000 17,000 Total operating expense Operating income.... (134,000) S 188,000