| Cost Behavior |
| Prepare a contribution margin income statement |
| 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: |
| | | Five Macaws |
| | | Traditional Income Statement (Absorption Costing) |
| | | For the Year Ended December 31 |
| | | Sales revenue | | $ 990,000 |
| | | Less: Cost of goods sold | | 673,000 |
| | | Gross profit | | $ 317,000 |
| | | Less operating expenses: |
| | | Selling and marketing expenses | $ 65,500 |
| | | Website maintenance expenses | 58,000 |
| | | Other operating expenses | 17,600 | 141,100 |
| | | Operating income | | $ 175,900 |
| 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. |
| Use the blue shaded areas on the ENTERANSWERS tab for inputs. |
| Always use cell references and formulas where appropriate to receive full credit. If you copy/paste from the Instructions tab you will be marked wrong. |
| Requirements |
| Prepare Five Macaws’ contribution margin income statement for last year. |
| | a. | Enter all amounts as positive values. Do not use a minus sign or parentheses for any values to be subtracted. |
| | b. | Follow the format shown in Exhibit 6-22. |
| Saving & Submitting Solution |
| 1 | Save file to desktop. |
| | a. | Create folder on desktop, and label COMPLETED EXCEL PROJECTS |
| 2 | Upload and submit your file to be graded. |
| | a. | Navigate back to the activity window - screen where you downloaded the initial spreadsheet |
| | b. | Click Choose button under step 3; locate the file you just saved and click Open |
| | c. | Click Upload button under step 3 |
| | d. | Click Submit button under step 4 |
| Viewing Results |
| 1 | Click on Results tab in MyAccountingLab |
| 2 | Click on the Assignment you were working on |
| 3 | Click on Project link; this will bring up your Score Summary |
| 4 | Within Score Summary window, click on Download (upper right) to download the spreadsheet with feedback |
Selina707
E6_38A_start.xlsx
