The traditional income statement for Pace Company shows sales $900,000, cost of goods sold $600,000, and operating expenses $200,000. Assuming all costs and expenses are 70% variable and 30% fixed, prepare a CVP income statement through contribution margin.

net income = $100000

Explanation:

given data

sales = $900,000

cost of goods = $600,000

operating expenses = $200,000

variable = 70%

fixed = 30%

solution

CVP income statement

sales = $900,000

total variable cost = sales - (cost of good sold) - (operating expenses)

total variable cost = $900,000 - ($600,000 * 70%) - ($200,000 * 70%)

total variable cost = $560000

and

contribution is $340000

fixed cost = (cost of good sold) - (operating expenses)

fixed cost = ($600,000 * 30%) - ($200,000 * 30%)

fixed cost = $240000

so net income is = contribution - fixed cost

net income is = $340000 - $240000

net income = $100000