1 Cost Behavior 2 Prepare a contribution margin income statement 3 Five Macaws is a specialty pet gift shop selling exotic pet-related items online. The shop has no physical 4 location. Results for last year are shown next: 5 6 Five Macaws Traditional Income Statement (Absorption Costing) 8 9 For the Year Ended December 31 Gross profit Less operating expenses: 10 Sales revenue 11 Less: Cost of goods sold 12 13 14 15 16 17 18 19 20 Selling and marketing expenses Website maintenance expenses Other operating expenses Operating income $ 990,000 673,000 $ 317,000 $ 65,500 58,000 17,600 141,100 $ 175,900 For internal planning and decision-making purposes, the owner of Five Macaws would like to translate the company's income statement into the contribution margin format. Since Five Macaws is online only, 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. 21 Use the blue shaded areas on the ENTERANSWERS tab for inputs. Always use cell references and formulas where appropriate to receive full credit. If you copy/paste from 22 the Instructions tab you will be marked wrong. 23 24 Requirements 25 Prepare Five Macaws' contribution margin income statement for last year. 26 27 28 a. b. Enter all amounts as positive values. Do not use a minus sign or parentheses for any values to be subtracted. Follow the format shown in Exhibit 6-22.