Question

Seating Company is currently selling 1,400 oversized bean bag chairs a month at a price of ​$95 per chair. The variable cost of each chair sold includes ​$65 to purchase the bean bag chairs from suppliers and a ​$2 sales commission. Fixed costs are $ 13,000 per month. The company is considering making several operational changes and wants to know how the change will impact its operating income: Prepare the​ company's current contribution margin income statement. ​(Use parentheses or a minus sign for an operating​ loss.)

Answer 1

Contribution Margin Income Statement

+Sales Revenue 1,400 x $95 = $133,000

-Variable production costs 1,400 x $65 = ($91,000)

-Variable selling costs 1,400 x $2 = ($2,800)

=Contribution Margin $133,000 - $91,000 - $2,800

= $39,200

-Fixed production costs ($13,000)

=Net profit = $39,200 - $13,000

= $26,200