Whitman Company has just completed its first year of operations. The company's traditional format income statement for the year follows:
Whitman Company Income Statement
Sales (42,500 units \$\ 38 per unit)
Cost of goods sold (42,500 units \$\ 21 per unit)
Gross margin
Selling and administrative expenses
Net operating income
Amount
\$ 1,275,000
\$ 892,500
\$ 382,500
\$ 300,000
\$ 82,500
The company's selling and administrative expenses consist of \$215,000 per year in fixed expenses and \$2 per unit sold in variable expenses. The \$21 unit product cost given above is computed as follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead (\$212,500 \div 42,500 units)
Unit product cost (under traditional costing)
\$ 7
\$ 8
\$ 1
\$ 5
\$ 21
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 34,500 units were sold in a quarter? You can assume no change to fixed expenses will occur if sales decline to 22,500 units. (Hint: You don't need to prepare a new income statement to determine the answer.)
Complete this question by entering your answers in the tabs below.
Prepare a contribution format income statement for the year ended December 31.
Whitman Company
Contribution Format Income Statement
For the year ended December 31
