Pretty Pets is a small etail business specializing in the sale of exotic pet gifts and accessories over the web. The business is owned by a sole proprietor and operated out of her home. Results for last year are shown next:
For internal planning and decision-making purposes, the owner of Pretty Pets would like to translate the company’s income statement into the contribution margin format. Since Pretty Pets is an etailer, all of its cost of goods sold were variable. A large portion of the selling and marketing expenses consisted of freight-out charges ($20,400), which were also variable. Only 20% of the remaining selling and marketing expenses and 25% of the website expenses were variable. Of the other operating expenses, 90% were fixed. Based on this information, prepare Pretty Pets’ contribution margin income statement for last year.
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