Five Macaws is a specialty pet gift shop selling exotic pet-related items online. The shop has no physical location. Results for last year are shown next:See attachmentFor internal planning and decision-making purposes, the owner of Five Macaws would like to translate the company’s income statement into the contribution margin format. Since Five Macaws is online only, all of its cost of goods sold is variable. A large portion of the selling and marketing expenses consists of freight-out charges ($19,400), which were also variable. Only 20% of the remaining selling and marketing expenses and 25% of the website expenses were variable. Of the other operating expenses, 90% were fixed. Five MacawsContribution Margin Income StatementFor the Year Ended December 31Sales revenueLess: Variable expensesVariable cost of goods soldVariable selling and marketing expensesVariable web site maintenance expensesOther variable operating expensesContribution marginLess: Fixed expensesFixed selling and marketing expenses$Fixed web site maintenances expensesOther fixed operating expensesOperating income$%24 Five MacawsTraditional Income Statement (Absorption Costing)For the Year Ended December 31Sales revenue$990,000673,000Less: Cost of goods soldGross profit$317,000Less operating expenses:Selling and marketing expenses$ 65,500Website maintenance expenses58,000Other operating expenses17,600141,100Operating income2$175,900%24

Business entities prepare the income statement so as to know how much amount of gross profit or net…

Five Macaws is a specialty pet gift shop selling exotic pet-related items online. The shop has no physical location. Results for last year are shown next: See attachment For internal planning and decision-making purposes, the owner of Five Macaws would like to translate the company’s income statement into the contribution margin format. Since Five Macaws is online only, all of its cost of goods sold is variable. A large portion of the selling and marketing expenses consists of freight-out charges ($19,400), which were also variable. Only 20% of the remaining selling and marketing expenses and 25% of the website expenses were variable. Of the other operating expenses, 90% were fixed.

Five Macaws is a specialty pet gift shop selling exotic pet-related items online. The shop has no physical location. Results for last year are shown next: See attachment For internal planning and decision-making purposes, the owner of Five Macaws would like to translate the company’s income statement into the contribution margin format. Since Five Macaws is online only, all of its cost of goods sold is variable. A large portion of the selling and marketing expenses consists of freight-out charges ($19,400), which were also variable. Only 20% of the remaining selling and marketing expenses and 25% of the website expenses were variable. Of the other operating expenses, 90% were fixed.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.17E

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