Ava's Hats is a small e-tail business specializing in the hand crocheted hats for infants and toddlers over the web. The business is owned by a sole proprietor and operated out of her home. Results for last year are as follows:

For internal planning and decision-making purposes, the owner of Ava's Hats would like to translate the company's income statement into the contribution margin format. Since Ava's Hats is an e-tailer, all of its cost of goods sold was variable. A large portion of the selling and marketing expenses consisted of freight-out charges ($16,500), which were also variable. Only 25% of the remaining selling and marketing expenses and 20% of the website expenses were variable. Of the other operating expenses, 90% were fixed.
Based on this information, prepare Ava's Hats' contribution margin income statement for last year.

Question

Ava's Hats is a small e-tail business specializing in the hand crocheted hats for infants and toddlers over the web. The business is owned by a sole proprietor and operated out of her home. Results for last year are as follows:

For internal planning and decision-making purposes, the owner of Ava's Hats would like to translate the company's income statement into the contribution margin format. Since Ava's Hats is an e-tailer, all of its cost of goods sold was variable. A large portion of the selling and marketing expenses consisted of freight-out charges ($16,500), which were also variable. Only 25% of the remaining selling and marketing expenses and 20% of the website expenses were variable. Of the other operating expenses, 90% were fixed.
Based on this information, prepare Ava's Hats' contribution margin income statement for last year.

Quizplus · Accepted Answer

The Answer of Ava's Hats is a small e-tail business specializing in the hand crocheted hats for infants and toddlers over the web. The business is owned by a sole proprietor and operated out of her home. Results for last year are as follows:

For internal planning and decision-making purposes, the owner of Ava's Hats would like to translate the company's income statement into the contribution margin format. Since Ava's Hats is an e-tailer, all of its cost of goods sold was variable. A large portion of the selling and marketing expenses consisted of freight-out charges ($16,500), which were also variable. Only 25% of the remaining selling and marketing expenses and 20% of the website expenses were variable. Of the other operating expenses, 90% were fixed.
Based on this information, prepare Ava's Hats' contribution margin income statement for last year.

Ava's Hats Is a Small E-Tail Business Specializing in the Hand