Hot Locks Company developed the following information for its' hair dryer sales:

Sales price $60.00 per unit Variable cost of goods sold $20.00 per unit Fixed cost of goods sold $106,000 Variable selling expense 10% of sales price Variable administrative expense $0.25 per unit Fixed selling expense $9,000 Fixed administrative expense $3,000 For the year ended December 31, 2020, Hot Locks Company produced and sold 10,000 hair dryers:

Required:

a) Prepare a Cost Volume Profit (CVP) income statement using the contribution margin format for Hot Locks Company for 2020. (6 marks)

b) Briefly explain how the CVP income statement differs from the traditional GAAP income statement. (2 marks)