Question

The Dairy Ice Cream Shoppe sold 9, 400 servings of ice cream during June for $3 per serving. The shop purchases the ice cream in large tubes from the BlueBell Ice Cream Company. Each tub costs the shop $9 and has enough ice cream cones. The shop purchases the ice cream cones for $0.10 each from a local warehouse club. The Dairy Ice Cream Shoppe is located strip mall, and rent for the space is $1, 850 per month. The shop expenses $230 a month for the depreclation of the shop's furniture and equipment. During June, the shop incurred an additional $2, 700 of other operating expenses (75% of these were fixed costs).

Required:
a. Prepare The Dairy Ice Cream Shoppe's June income statement using a traditional format.
b. Prepare The Dairy Ice Cream Shoppe's June income statement using a contribution margin format.

Answer 1

Contribution Margin:

Gross Profit / Revenue = $21,620 / $28,200

Contribution Margin is 76%

Step-by-step explanation:

Income Statement for Dairy Ice Cream Shoppe

Revenue [9,400 servings * $3 per serving] = $28,200

Cost of Sales [ 9,400 servings * $9 / 15 cones + 0.10 per cone] = $6,580

Gross Profit = $21,620

Less Operating expense :

Rent Expense $1,850

Shop Expense $230

Other operating expenses [$2,700 * 75%] $2,025

Operating profit $17,515