Week 4, LO 4 Demo - Less Variable Expenses =Contribution...

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Week 4 Week 4 Skill Building Demonstration Problem 4 Prepare an income statement using the contribution format. Learning Objective 4 Contribution Approach distinguishes between fixed cost and variable costs. Contribution Margin is the amount remaining from sale revenues after deducting all variable expenses, this amount “contributes” towards covering fixed expenses and then toward profits for the period. Traditional Approach Cost organized by function Contribution Approach Cost organized by behavior Sales Less Cost of Goods Sold = Gross Margin Less Selling and Administrative expenses = Net Operating Income Sales
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Unformatted text preview: Less Variable Expenses =Contribution Margin Less Fixed Expenses =Net Operating Income Definitions Neeras Pawn shop had sales of $10,000 for the year 2009. Her Variable expenses were $3,000 and her fixed expenses were $5,000. Required: Construct Contribution Income Statement. Problem Neeras Pawn Shop Income Statement December 31, 2009 Sales. ..... $10,000-Variable Expenses.($,3000) Contribution Margin. ..$7,000 Fixed Expenses. ...($5,000) Net Operating Income$2,000 Solution...
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This note was uploaded on 04/21/2011 for the course ACTG 211 taught by Professor Galvan during the Spring '11 term at Finger Lakes Community College.

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