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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Use the following information for Brief Exercises 2-24 and 2-25:

Slapshot Company makes ice hockey sticks and sold 1,880 sticks during the month of June at a total cost of $433,000. Each stick sold at a price of $400. Slapshot also incurred two types of selling costs: commissions equal to 10% of the sales price and other selling expense of $65,000. Administrative expense totaled $53,800.

Brief Exercise 2-25 Income Statement Percentages

Refer to the information for Slapshot Company above.

Required:

Prepare an income statement for Slapshot for the month of June and calculate the percentage of sales revenue represented by each line of the income statement. (Note: Round answers to one decimal place.)

To determine

Prepare the income statement of Company S for the month of June along with the percentage of sales revenue represented by each line in the income statement.

Explanation

Income Statement:

The statement that shows revenue and expenses incurred over a period of time (usually one year) is called income statement. It is used for external financial reporting as it helps the outsiders and investors in evaluating the firm’s financial health.

The income statement of Company P for the month of December is given below:

Company S
Income Statement
For the month of June
 Amount ($)Amount ($)Percent
Sales revenue 752,000100
Cost of goods sold: 433,00057.6
Gross margin 319,00042.4
Less: Selling expense:   
Commission75,200  
Fixed selling expense65,000140,20018.6
Administrative expense 53,8007.2
Net Income 125,00016.6

Table (1)

Therefore, the amount and percentage of net income are $125,000 and 16.6% respectively.

Working Notes:

Calculation of sales revenue:

Sales revenue=Sticks sold×Selling price of a stick=1,880sticks×$400=$752,000

Hence, the amount of sales revenue is $752,000.

Calculation of the amount of commission:

Commission=Sales revenue×Commission rate=$752,000×10%=$75,200

Hence, the amount of commission is $75,200.

Calculation of sales revenue percentage with respect to sales revenue:

Sales revenue percentage=(Sales revenueSales revenue)×100=($752,000$752,000)×100=100%

The sales revenue percentage is 100%.

Calculation of COGS percentage with respect to sales revenue:

COGS percentage=(COGSSales revenue)×100=($433,000$752,000)×100=57

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