Answer:
1. contribution format income statement for the next quarter
Sales (31,000 units × $58) $1,798,000
Less Variable Costs
Cost of good sold (31,000 units × $28) $868,000
Sales commissions ( $1,798,000 × 5%) $89,900
Shipping expense ( $5.00 × 31,000 units) $155,000 ($1,112,900)
Contribution $985,100
Less Fixed Costs
Advertising expense $178,000
Shipping expense $48,000
Administrative salaries $88,000
Insurance expense $9,800
Depreciation expense $58,000 ($381,800)
Net Income / (Loss) $303,300
2. traditional format income statement for the next quarter
Sales (31,000 units × $58) $1,798,000
Less Cost of good sold
Cost of good sold (31,000 units × $28) ($868,000)
Gross Profit $930,000
Less Expenses
Sales commissions ( $1,798,000 × 5%) $89,900
Advertising expense $178,000
Shipping expense $48,000
Variable Shipping expense $155,000
Administrative salaries $88,000
Insurance expense $9,800
Depreciation expense $58,000 ($626,700)
Net Income / (Loss) $303,300
Explanation:
The Contribution Income Statement shows the Contribution whilst the Traditional Income Statement shows the Gross Profit.
