Prepare conventional & contribution margin income statement
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The Music Box Company manufactures compact discs. Each disc sells for $3.50 with unit variable manufacturing expenses of $1.50. For the year ended December 31, 20X6, total fixed manufacturing expenses were $325,000 and 500,000 discs were produced and sold. Marketing expenses amounted to 8% of sale price plus $40,000 in fixed expenses. Administrative expenses included $17,500 in fixed expenses and variable expenses equal to 5% of sale price.
a) Prepare a conventional income statement for the year ended December 31, 20X6.
b) Prepare a contribution margin income statement for the year ended December 31, 20X6.
c) Which of the two statements would be used by management for decision making and why?
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Solution Summary
Your response is attached and includes two formatted income statement (a summarized and a more detailed version) and a discussion about which version management needs to use.
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