Question

Janson Company prepares an income statement for financial accounting purposes using the traditional income statement format, as well as an income statement for managerial accounting purposes using the contribution margin format. Selected information from both income statement formats are as follows:

Revenues $200,000
Cost of goods sold $40,000
Contribution ion margin ratio 50%
Operating expenses $120,000
Fixed expenses $60,000

Required:
Using the contribution margin format, operating income is:_______

Answer 1

In the contribution margin format, the operating income can be calculated using the formula: Operating Income = Revenues - Variable Costs - Fixed Costs. Given the information provided, the operating income is $40,000.

Step-by-step explanation:

The contribution margin format separates costs into variable costs and fixed costs, allowing for better analysis of cost behavior and profitability. In this format, the operating income can be calculated using the following formula:

Operating Income = Revenues - Variable Costs - Fixed Costs

Given the information provided, the contribution margin ratio is 50%. The contribution margin can be calculated by multiplying the revenues by the contribution margin ratio:

Contribution Margin = Revenues x Contribution Margin Ratio

Using the contribution margin formula, the operating income would be:

Operating Income = Revenues - (Variable Costs + Fixed Costs)
= $200,000 - ($200,000 x 50% + $60,000)
= $200,000 - ($100,000 + $60,000)
= $200,000 - $160,000
= $40,000