Home Entertainment is a small, family-owned business that purchases LCD televisions from a reputable manufacturer and sells them at the retail level. The televisions sell, on average, for $1,500 each. The average cost of a television from the manufacturer is $900. Home Entertainment has always kept careful accounting records, and the costs that it incurs in a typical month are as follows:
During April, the company sold and delivered 150 televisions.
1. Prepare an income statement for April using the traditional format with costs organized by function.
2. Redo (1) above, this time using the contribution format with costs organized by behaviour. Show costs and revenues on both a total and a per unit basis down through contribution margin.
3. Refer to the income statement you prepared in (2) above. Why might it be misleading to show the fixed costs on a per unit basis?

  • CreatedJuly 08, 2015
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