The Joshua Smith Company (JSC) is a wholesale toy distribution company. The company sells three products Risk, Monopoly and Zingo. Budgeted unit sales by product for the month of December and associated selling price and variable costs are as follows:

• Risk : 500 units - 22% - selling prices: 24.00 - variable costs 14.40
• Monopoly : 750 units - 33% - selling prices: 15.00 - variable costs: 6.00
• Zingo : 1000 units - 44% - selling prices: 9.00 - variable costs: 2.25

JSC also has $15,000 in fixed costs for the month.

Required: Prepare a Contribution Approach Budgeted Income Statement for JSC. To help the owner of JSC predict his business, demonstrate how much Operating Income would increase for each extra unit sold.

During the month of December, JSC actually sold 2,350 units. 1,200 Risk games, 550 Monopoly games and 600 Zingo games. All other factors and expenses were the same as budgeted. While the owner of JSC is happy about the overachievement in units sold, she is confused why Operating Income did not increase as much as you demonstrated to her.

Required: Prepare a Contribution Approach Actuals Income Statement for JSC. Write the owner a short memo explaining why actual results vary from the model you demonstrated based on budgeted amounts.