Question

Kopi Company produces dog cages that are sold for $40 per unit. The company produced and sold 6,000 dog cages during July 2017. There were no beginning or ending inventories. Variable and fixed costs follow.

Variable Costs per Unit Fixed Costs per Month
Manufacturing: Manufacturing overhead $40,000
Direct materials $10 Selling and administrative 20,000
Direct labor 2 Total $60,000
Manufacturing overhead 5 $17
Selling and administrative 5
Total $22
Required
Prepare a contribution income statement for July.
Do not use any negative signs with your answers.
Kopi Company
Contribution Income Statement
For the Month of July 2017
Sales $ Answer
Less variable costs
Direct materials $ Answer
Direct labor Answer
Manufacturing overhead Answer
Selling and administrative Answer Answer
Contribution margin Answer
Less fixed cost:
Manufacturing overhead Answer
Selling and administrative Answer Answer
Profit $ Answer

Answer 1

Answer and Explanation:

The Preparation of contribution income statement for July is shown below:-

Kopi Company

Contribution income statement

for the month of July

Particulars Amount

Sales (6,000 × $40) $240,000

Less: Variable costs

Direct materials (6,000 × $10) $60,000

Direct labor ( 6000 × $2) $12,000

Manufacturing overhead (6,000 × 5) $30,000

Selling and administrative (6,000 × $5) $30,000 $132,000

Contribution margin $108,000

Less: Fixed cost

Manufacturing overhead $40,000

Selling and administrative $20,000 $60,000

Net Profit $48,000

Therefore to reach the net profit we simply deduct the fixed cost from variable cost.