Question

Russell Inc. had sales of $2,210,000for the first quarter of 2017. In making the sales, the company incurred the following costs and expenses.

Variable Fixed
Cost of goods sold $921,000 $441,000
Selling expenses 71,000 46,000
Administrative expenses 87,000 99,000
Prepare a CVP income statement for the quarter ended March 31, 2017.

Answer 1

A Cost-Volume-Profit statement is used to show just how the different costs incurred contribute to the expenses. It divides the costs into variable and fixed costs for better analysis.

Sales $2,210,000

Variable Costs:

Cost of Goods sold $921,000

Selling expenses $ 71,000

Admin expenses $87,000

Total variable costs ($1,079,000)

Contribution margin $1,131,000

Fixed costs:

Cost of goods $441,000

Selling expenses $ 46,000

Admin expenses $ 99,000

Total fixed costs ($586,000)

Net operating income $545,000