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The Independence Company had the following manufacturing data for the year 2006 (in thousands
of dollars).
Beginning and ending inventory 0
Direct materials used 400
Direct labor 330
Supplies 20
Utilities variable portion 40
Utilities fixed portion 12
indirect labor variables 90
indirect labor fixed 40
Depreciation 200
Property taxes 20
Supervisory salaries 50
Selling Exp. were $300,000 (including $60,000 that were variable ) and general admin exp. were $144,000 (including $23,000 that were variable) . Sales were 1.3 million Direct labor and supplies are regarded as variable cost.
1. Prepare two income statements, one using the contribution approach and one using the absorption
approach.
2. Suppose that all variable costs fluctuate directly in proportion to sales and that fixed costs are
unaffected over a very wide range of sales. What would operating income have been if sales had
been $2.0 million instead of $1.8 million? Which income statement did you use to help obtain
your answer? Why?
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Name for an expanded contribution margin income statement?
A contribution margin income statement is an income statement in which all variable expenses are deducted from sales to arrive at a contribution margin. It is the expanded version.
Is depreciation included in a contribution income statement?
Yes depreciation is included in contribution income statement as depreciation is part of fixed cost of company.
What does the contribution income statement hightlights?
Contribution income statement highlights the variable expenses as well fixed expenses incurred by company for selling goods or services.
What is a contribution approad income statement?
1. Contribution approach income statement is different from simple income statement in this sense that in contribution margin approach variable costs are deducted from revenues to find out how much any sale of unit of product is contributing towards recovery of fixed cost of product.
How does the contribution margin income statement differ from the income statement used in financial reporting?
Income statement in financial reporting is different in this sense that in that income statement all expenses and incomes are shown as incomes and expenses and there is no classification of fixed expenses or variable expense while in contribution margin income statement expenses are shown in this way that separate the fixed expenses from variable portion of expenses.
What is a Pro-forma contribution margin income statement?
Proforma contribution margin income statement Sales revenue xxxxLess: Variable cost xxxxContribution margin xxxxLess: Fixed Cost xxxxprofit (Loss) xxxx
How does a contribution margin income statement different from the income statement used in financial reporting?
Contribution margin income statement differs in this way that it only deduct the variable cost from sales to point out that how much is any unit of product is contributing towards recovery of fixed cost while normal income statement don't show this information.
Sample of income statement contribution margin?
Sales xxxxLess:Variable cost xxxxContribution margin xxxx (balancing figure)
What are uses of an income statement?
An income statement shows the profitability of an entity. Profitability can be a measure that investors and shareholders rely on to make their decisions.
How do you do Income statement?
Comparative income statement is same as normal income statement with little addition of that income statement as well from which comparison is required.
How do you prepare comparative income statement?
Comparative income statement is same as normal income statement with little addition of that income statement as well from which comparison is required.
What are the two categories of the income statement?
Following are two catagories of income statement: 1- Single Step Income statement 2- Multy-step income statement
