E6-54B Prepare a contribution margin income statement (Learning Objective 6)

Fabulous Flamingos is a specialty pet gift shop selling exotic pet-related items over the Internet. Results for last year are as follows:

For internal planning and decision-making purposes, the owner of Fabulous Flamingos would like to translate the company’s income statement into the contribution margin format. Since Fabulous Flamingos is a web retailer and has no physical presence, all of its cost of goods sold is variable. A large portion of the selling and marketing expenses consists of freight-out charges $19,400, 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 Fabulous Flamingos’ contribution margin income statement for last year.

1 2 3 4 5 Sales revenue 6 Less: Cost of goods sold 7 Gross profit 8 Less operating expenses: 9 10. Fabulous Flamingos Traditional Income Statement (Absorption Costing) For the Year Ended December 31 $ 1,005,000 669,000 $ 336,000 11 12 Selling and marketing expenses Website maintenance expenses Other operating expenses Operating income $ 61,000 56,500 17,000 134,500 $ 201,500 13 D