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.

PRETTY PETS Income Statement Year Ended December 31 Cost of goods sold.. Gross profit. Operating expenses: $1,011,000 (671,000) 340,000 Selling and marketing expense$61,000 Website maintenance expenses 60,000 Other operating expenses. ....17,800 Total operating expenses Operating income... (138,800) $ 201,200