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9 February, 23:27

Prepare traditional and contribution margin income statements (Learning Objective 6) The Willowick Ice Cream Shoppe sold 8,700 servings of ice cream during June for $3 per serving. The shop purchases the ice cream in large tubs from the Deluxe Ice Cream Company. Each tub costs the shop $12 and has enough ice cream to fill 30 ice cream cones. The shop purchases the ice cream cones for $0.25 each from a local warehouse club. Located in an outdoor mall, the rent for the shop space is $1,600 per month. The shop expenses $200 a month for the depreciation of the shop's furniture and equipment. During June, the shop incurred an additional $2,600 of other operating expenses (75% of these were fixed costs).

1. Prepare The Willowick Ice Cream Shoppe's June income statement using a traditional format

2. Prepare The Willowick Ice Cream Shoppe's June income statement using a contribution margin format.

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  1. 10 February, 00:19
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    Sales Revenues 26100

    COGS 5655

    gross profit 20445

    rent expense 1600

    depreciation expense 200

    operating expense 2600

    net income 16045

    Sales Revenues 26100

    Variable Cost 6305

    Contribution margin 19795

    rent expense 1600

    depreciation expense 200

    fixed operating expense 1950

    net income 16045

    Explanation:

    traditional:

    COGS

    $12 tub / 30 ice cream cones = $0.40

    + 0.25 ice cream cones

    total per unit 0.65

    8,700 x 0.65 = 5655

    Gross profit: sales revenue less COGS

    then, we subtract the rent expense, depreicaiton expense and operatign expenses to get net income.

    contribution the variable cost will be subtracted from the sales revenues

    that will include the 75% of the operating expenses

    The difference between sales revenue and variable cost is called contribution margin.
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