Income statement attached

Putting Fixed and Variable Costs to work in the Income Statement.

The income statements shown below are NOT for a manufacturing firm; they are for a RETAILER.The retailer income statements are simpler in form and therefore more appropriate for an introduction to the statement.

Two types of income statements are shown:The Traditional Format, which is used for external reporting and the Contribution Margin or Variable format, which is used internally because it provides valuable information on fixed and variable costs. Managerial accounting's focus is internal. The Contribution or Variable format of income statement is not permitted for external financial reports used by investors, creditors, IRS, etc.

The following information pertains to Furniture R Us, a retailer.Furniture R US buys products from Ergo Eco Furniture Manufacturer, but does not manufacture the product itself.

Furniture R US is a customer of Ergo Eco Furniture Manufacturer. Data can be inputted into the yellow cells.

Leave the unshaded cells ALONE. The resulting income statements shown at the right. Leave the income statement cells ALONE, too.

Putting Fixed and Variable Costs to work in the Income Statement. The income statements shown below are NOT for a manufacturing firm; they are for a RETAILER. The retailer income statements are simpler in form and therefore more appropriate for an introduction to the statement. Two types of income statements are shown: The Traditional Format, which is used for external reporting and the Contribution Margin or Variable format, which is used internally because it provides valuable information on fixed and variable costs. Managerial accounting's focus is internal. The Contribution or Variable format of income statement is not permitted for external financial reports used by investors, creditors, IRS, etc. The following information pertains to Furniture R Us, a retailer. Furniture R US buys products from Ergo Eco Furniture Manufacturer, but does not manufacture the product itself. Furniture R US is a customer of Ergo Eco Furniture Manufacturer. Data can be inputted into the yellow cells. Leave the unshaded cells ALONE. The resulting income statements shown at the right. Leave the income statement cells ALONE, too. Sales info: # Sold 3 3 3 9 Product Comfy Chair Stylish Chair Scooter Chair Sales Price $ $ $ Total Sales Total Sales 395 $ 335 $ 895 $ $ 1,185.00 1,005.00 2,685.00 4,875.00 Variable cost info: HERE ARE THE TWO TYPES OF INCOME STATEMENTS FURNITURE R US INCOME STATEMENT (TRADITIONAL) FOR THE PERIOD ENDING XX/XX/XX Sales Cost of Goods Sold Gross Margin Selling & Admin Expenses: Selling Exp Admin Exp $ 981.25 219.00 4,875.00 2,625.00 2,250.00 1,200.25 Variable Cost of Goods Sold NET OPERATING INCOME # Sold 3 3 3 9 Cost of chair $ $ $ Total Costs Total Variable CGS 200 $ 600.00 165 $ 495.00 510 $ 1,530.00 $ 2,625.00 $ 1,049.75 FURNITURE R US INCOME STATEMENT (VARIABLE, CONTRIBUTION FORMAT) FOR THE PERIOD ENDING XX/XX/XX Sales $ 4,875.00 The Contribution Margin format income statement highlights variable and fixed costs so that more meaningful decisions can be made. Variable Selling Expenses # Sold 3 3 3 9 Product Comfy Chair Stylish Chair Scooter Chair Commission $ $ $ Total Commission 59.25 $ 177.75 50.25 $ 150.75 134.25 $ 402.75 $ 731.25 Variable Admin Expense Total Sold 9 Admin Exp/Chair Total Var Adm Exp $ 11 $ 99.00 Variable Expenses: Cost of Goods Sold Variable Selling Exp Variable Admin Exp 2,625.00 731.25 99.00 Contribution Margin Fixed Expenses: Fixed Selling Exp Fixed Admin Exp NET OPERATING INCOME 3,455.25 $ 250.00 120.00 1,419.75 Contribution margin is a new concept and powerful one. Simply it is the subtraction of SALES MINUS VARIABLE COSTS or EXP 370.00 $ 1,049.75 Fixed cost info: Fixed selling expenses Fixed admin expense $ $ 250.00 120.00 Note that the net incomes are identical here. If this had been a manufacturing firm, and there had been ending finished goods inventory, the two methods would produce different income results. The contribution margin format/variable income format and the traditional/absorption format income statement will be major topics in Week 4. S or EXPENSES. More in Week 4 on CM (contribution margin). SAME DOCUMENT FROM THE CONTENT OF WEEK 2 Putting Fixed and Variable Costs to work in the Income Statement. ASSIGNMENT: 1. Suppose the sales figures improved to: 17 14 12 0 0 0 (12 PTS) The income statements shown below are NOT for a manufacturing firm; they are for a RETAILER. The retailer income statements are simpler in form and therefore more appropriate for an introduction to the statement. Comfy Chair Stylish Chair Scooter Chair Comfy Chair Stylish Chair Scooter Chair What is the NOI? (NET OPERATING INCOME) Two types of income statements are shown: The Traditional Format, which is used for external reporting and the Contribution Margin or Variable format, which is used internally because it provides valuable information on fixed and variable costs for decision-making. Managerial accounting's focus is internal decisions. The Contribution or Variable format of income statement is not permitted for external financial reports used by investors, creditors, IRS, etc. The following information pertains to Furniture R Us, a retailer. Furniture R US buys products from Ergo Eco Furniture Manufacturer, but does not manufacture the product itself. Furniture R US is a customer of Ergo Eco Furniture Manufacturer. Data can be inputted into the yellow cells. Leave the unshaded cells ALONE. The resulting income statements shown at the right. Leave the income statement cells ALONE, too. 2. Suppose the sales figures dropped to: A natural disaster temporarily closed the company. HERE ARE THE TWO TYPES OF INCOME STATEMENTS FURNITURE R US INCOME STATEMENT (TRADITIONAL) FOR THE PERIOD ENDING XX/XX/XX What is the NOI/NOL? (NET OPERATING INCOME/LOSS) 3. At 0 sales, the loss equals (enter a term, not a #) Sales info: # Sold 3 3 3 9 Product Comfy Chair Stylish Chair Scooter Chair Sales Price $ $ $ Total Sales Total Sales 395 $ 335 $ 895 $ $ 1,185.00 1,005.00 2,685.00 4,875.00 Variable cost info: Sales Cost of Goods Sold Gross Margin Selling & Admin Expenses: Selling Exp Admin Exp $ 981.25 219.00 4,875.00 2,625.00 2,250.00 1,200.25 Variable Cost of Goods Sold NET OPERATING INCOME # Sold 3 3 3 9 Cost of chair $ $ $ Total Costs Total Variable CGS 200 $ 600.00 165 $ 495.00 510 $ 1,530.00 $ 2,625.00 $ 1,049.75 FURNITURE R US INCOME STATEMENT (VARIABLE, CONTRIBUTION FORMAT) FOR THE PERIOD ENDING XX/XX/XX Sales 4. Suppose an advertising campaign was undertaken, in which fixed admin increased from $120 to $1600 and as a result projected sales would increase from .......................................................to the following Fixed Selling Exp is unchanged at $250. 15 Comfy Chair Hint: Ctrl & Z is handy to undo 12 Stylish Chair changes made. 9 Scooter Chair $ 4,875.00 What would the CHANGE in NOI be? Should the ad campaign be undertaken? Provide a brief explanation . yeso The Contribution Margin format income statement highlights variable and fixed costs so that more valuable decisions can be made. Variable Selling Expenses # Sold 3 3 3 9 Product Comfy Chair Stylish Chair Scooter Chair Commission $ $ $ Total Commission 59.25 $ 177.75 50.25 $ 150.75 134.25 $ 402.75 $ 731.25 Variable Admin Expense Total Sold 9 $ Admin Exp/Chair Total Var Adm Exp 11 $ 99.00 Variable Expenses: Cost of Goods Sold Variable Selling Exp Variable Admin Exp 2,625.00 731.25 99.00 Contributuion Margin Fixed Expenses: Fixed Selling Exp Fixed Admin Exp NET OPERATING INCOME 3,455.25 $ 250.00 120.00 1,419.75 Contribution margin is a new concept and powerful one. Simply it is the subtraction of SALES MINUS VARIABLE COSTS or EXPENS 370.00 $ 1,049.75 Fixed cost info: Fixed selling expenses Fixed admin expense $ $ 250.00 120.00 Note that the net incomes are identical here. If this had been a manufacturing firm, and there had been ending finished goods inventory, the two methods would produce different income results. The contribution margin format/variable income format and the traditional/absorption format income statement will be major topics in Week 4. 1600 ollowing 19 15 12 5. Suppose Furniture R Us became wildly popular and the sales figures changed to: Fixed Admin Exp remains $120 Fixed Selling Exp remains $250 75 68 59 Comfy Chair Stylish Chair Scooter Chair What is the NOI? (NET OPERATING INCOME) 6. If sales did increase so drastically, what would you anticipate would realistically happen to fixed costs? 7. Suppose Furniture R Us decided to specialize in one type of chair. Fixed costs would be projected as $475 for selling and $110 for admin, regardless of which chair was sold. The total number of chairs would remain 36. All Comfy Chairs yield NOI of All Stylish Chairs yield NOI of All Scooter Chairs yield NOI of Deciding which products to sell is a SALES MIX decision. 8. With fixed expenses remaining at $475 selling and $110 admin, input various sales figures for each of chairs (you can use 0s) to bring NOI as close to 0 as possible. It is not likely to work out that NOI is exactly 0. When you get NOI to as close to 0 as you can, leave that scenario for submission. When net operating income is 0, that is the BREAKEVEN point. Note that at breakeven, the contribution margin equals (or in this case just about equals) fixed costs. Week 4 will include a lot of breakeven discussion, formulas, and analysis. or EXPENSES. More in Week 4 on CM (contribution margin)