Reference no: EM133127908

Question - Hot Locks Company developed the following information for its' hair dryer sales:

Sales price $60.00 per unit

Variable cost of goods sold $20.00 per unit

Fixed cost of goods sold $106,000

Variable selling expense 10% of sales price

Variable administrative expense $0.25 per unit

Fixed selling expense $9,000

Fixed administrative expense $3,000

For the year ended December 31, 2020, Hot Locks Company produced and sold 10,000 hair dryers:

Required -

a) Prepare a Cost Volume Profit (CVP) income statement using the contribution margin format for Hot Locks Company for 2020.

b) Briefly explain how the CVP income statement differs from the traditional GAAP income statement.