Problem 21-1

I need help making income statements using contribution margin and traditional formats; discuss differences (L.O. 1)

Montoya Company has the following selected data for the current year:

Sales (10,000 units) $90,000

Direct materials 30,000

Direct labor costs 10,000

Variable manufacturing overhead 3,500

Fixed manufacturing overhead 7,500

Variable selling and administrative expenses 2,500

Fixed selling and administrative expenses 15,000

The company produced and sold 10,000 units. Direct materials and direct labor are variable costs.

a. How can I make an income statement for the current year using the contribution margin format?

b. How can I an income statement for the current year using the traditional format?

c. What additional information do you learn from the contribution margin format?