Reference no: EM132816164
Question - Ava's Chapeaus is a small e-tail business specializing in the hand crocheted hats for infants and toddlers over the web. The business is owned by a sole proprietor and operated out of her home. Results for last year are as follows:
AVA'S CHAPEAUS Income Statement For the Year Ended December 31
Sales revenue $394,800
Cost of goods sold (266,000)
Gross profit 128,800
Operating expenses:
Selling and marketing expenses $24,400
Website maintenance expenses 22,400
Other operating expenses 6,800
Total operating expenses (53,600)
Operating income $75,200
For internal planning and decision-making purposes, the owner of Ava's Chapeaus would like to translate the company's income statement into the contribution margin format. Since Ava's Chapeaus is an e-tailer, all of its cost of goods sold was variable. A large portion of the selling and marketing expenses consisted of freight-out charges ($7,600), which were also variable. Only 25% of the remaining selling and marketing expenses and 20% of the website expenses were variable. Of the other operating expenses, 80% were fixed.
Based on this information, prepare Ava's Chapeaus' contribution margin income statement for last year.
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