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9 May, 20:42

5b. MousePad Computer Company, in addition to its retail sales, conducts night classes in computer technology. MousePad has provided you the following information: Number of students 120 Revenue per student $450 Student-related variable costs $100 per student Salary for three instructors $1,800 each Administrative costs $30 per student Maintenance on building $15,000 per year Required: Construct a contribution margin format income statement.

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  1. 9 May, 22:33
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    Net Income = $18,000

    Explanation:

    MousePad Computer Company

    Contribution Margin Income statement

    Revenue (120 students * $450) = $54,000

    Less: Variable expenses:

    Student-related costs (120 students * $100) = $12,000

    Administrative costs (120 students * $30) = $ 3,600

    Total variable expenses = ($15,600)

    Contribution Margin $38,400

    Less: Fixed cost

    Instructors salary (3 * $1,800) = $ 5,400

    Maintenance on building = $15,000

    Total fixed cost = $ (20,400)

    Net Operating Income = $18,000

    Note:

    Students cost is a variable expense, because if we decrease the student's number, the revenue and expenses will decrease proportionately. Moreover, the company is getting profit from the students.
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