Question 2 (20 points)

Problem 2: Pride and Shine is a car wash located in Cowhead, NL and has a December 31 year end. Pride charges $11 for each car it washes, and it costs them $4.25 on average to wash a car. In 2020 Pride washed more cars than ever causing revenue to hit $1 million for the first time ever ($1,155,000 to be exact). Pride employs two car washers Adam Ford and Jenny Suzuki. Adam makes a fixed salary of $35,000 while Jenny makes a fixed salary of $40,000. Both Adam and Jenny earn also get a commission that depends on how many cars they wash. For 2020 Adams commission was $26,250 and Jennys was $36,750.

Pride has a head office located not too far from its car wash. Here Pride employs three employees who make $40,000 each in salaries ($120,000 in total). The rent for this office is $1,400 per month. Pride does not own the land where its car wash is located and pays a lease of $10,000 per year for the land. The only other administrative cost is their liability insurance, which costs $0.06 per car washed.

An investment in a storage unit a couple of years ago allows Pride to store inventory of cleaning supplies. Its opening inventory (January 1) of cleaning rags was 560 rags and its December 31 closing inventory was 850 cleaning rags.

Required

1. Prepare a traditional income statement for the year ended December 31, 2020.
2. Prepare a contribution format income statement for the year ended December 31, 2020.
3. If Pride and Shine expects to wash 110,000 cars in 2021, what will their profit be? Be sure to show your calculations/workings.