Question
Ava's Chapeaus is a small e-tail business specializing in the hand crocheted hats for infants and toddlers over the web. The business is owned by
Ava's Chapeaus is a small e-tail business specializing in the hand crocheted hats for infants and toddlers over the web. The business is owned by a sole proprietor and operated out of her home. Results for last year are as follows:
AVA'S CHAPEAUS
Income Statement
For the Year Ended December 31
Sales revenue $394,800
Cost of goods sold (266,000)
Gross profit 128,800
Operating expenses:
Selling and marketing expenses $24,400
Website maintenance expenses 22,400
Other operating expenses 6,800
Total operating expenses (53,600)
Operating income. $75,200
For internal planning and decision-making purposes, the owner of Ava's Chapeaus would like to translate the company's income statement into the contribution margin format. Since Ava's Chapeaus is an e-tailer, all of its cost of goods sold was variable. A large portion of the selling and marketing expenses consisted of freight-out charges ($7,600), which were also variable. Only 25% of the remaining selling and marketing expenses and 20% of the website expenses were variable. Of the other operating expenses, 80%
were fixed.
Based on this information, prepare Ava's Chapeaus' contribution margin income statement for last year.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started