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Assume that you are part of the accounting team for Epstein Hardware. The company has only one product that sells for $40 per unit. Epstein estimates total fixed costs to be $9,500. Epstein estimates direct materials cost of $4.80 per unit, direct labor costs of $6.00 per unit, and variable overhead costs of $1.20 per unit. The CEO would like to see what the gross margin and operating income will be if 500 units are sold in the next period.
Problem 1: Prepare a contribution margin income statement.
Epstein Hardware
Contribution margin
$Less: Fixed costs
Operating income$
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