Question

Whitman Company Income Statement Amount $ Sales (48,500 units x $33 per unit) 1,600,500 Cost of goods sold (48,500 units x $25 per unit) 1,212,500 Gross margin 388,000 Selling and administrative expenses 324,000 Net operating income $ 64,000 The company's selling and administrative expenses consist of $227,000 per year in fixed expenses and $2 per unit sold in variable expenses. The $25 unit product cost given above is computed as follows: Direct materials $8 Direct labor 9 Variable overhead 3 Fixed overhead ($242,500 \div 48,500 units) 5 Unit product cost (under traditional costing) $ 25 Required: 1. Prepare a contribution format income statement for the year ended December 31. 2. What was the contribution toward fixed expenses and profits for each unit sold? (State this figure in a single dollar amount per snowboard.) 3. What would operating income be if only 40,500 units were sold in a quarter? You can assume no change to fixed expenses will occur if sales decline to 28,500 units. (Hint: You don't need to prepare a new income statement to determine the answer.)

          Whitman Company Income Statement
Amount
$
Sales (48,500 units x $33 per unit)
1,600,500
Cost of goods sold (48,500 units x $25 per unit)
1,212,500
Gross margin
388,000
Selling and administrative expenses
324,000
Net operating income
$ 64,000
The company's selling and administrative expenses consist of $227,000 per year in fixed expenses and $2 per unit sold in variable
expenses. The $25 unit product cost given above is computed as follows:
Direct materials
$8
Direct labor
9
Variable overhead
3
Fixed overhead ($242,500 \div 48,500 units)
5
Unit product cost (under traditional costing)
$ 25
Required:
1. Prepare a contribution format income statement for the year ended December 31.
2. What was the contribution toward fixed expenses and profits for each unit sold? (State this figure in a single dollar amount per
snowboard.)
3. What would operating income be if only 40,500 units were sold in a quarter? You can assume no change to fixed expenses will
occur if sales decline to 28,500 units. (Hint: You don't need to prepare a new income statement to determine the answer.)

Whitman Company Income Statement
Amount
Sales (48,500 units x33 per unit)
1,600,500
Cost of goods sold (48,500 units x 25 per unit)
1,212,500
Gross margin
388,000
Selling and administrative expenses
324,000
Net operating income 64,000
The company's selling and administrative expenses consist of 227,000 per year in fixed expenses and2 per unit sold in variable
expenses. The 25 unit product cost given above is computed as follows:
Direct materials8
Direct labor
9
Variable overhead
3
Fixed overhead (242,500 ÷ 48,500 units)
5
Unit product cost (under traditional costing) 25
Required:
1. Prepare a contribution format income statement for the year ended December 31.
2. What was the contribution toward fixed expenses and profits for each unit sold? (State this figure in a single dollar amount per
snowboard.)
3. What would operating income be if only 40,500 units were sold in a quarter? You can assume no change to fixed expenses will
occur if sales decline to 28,500 units. (Hint: You don't need to prepare a new income statement to determine the answer.)

Added by Juan Francisco B.

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