Two Turtles is a specialty pet gift store selling exotic pet-related items through its website. Two Turtles has no physical store; all sales are through its website.
Results for last year are shown next:

For internal planning and decision-making purposes, the owner of Two Turtles would like to translate the company's income statement into the contribution margin format. Since Two Turtles is web-based, all of its cost of goods sold is variable. A large portion of the selling and marketing expenses consists of freight-out charges ($19,000), 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 Two Turtles' contribution margin income statement for last year.

TWO TURTLES Income Statement Year Ended December 31 Cost of goods sold Gross profit Operating expenses $1,011,000 (673,000) $ 338,000 Selling and marketing expenses Website maintenance expenses Other operating expenses 60,000 Total operating expenses Operating income (142,000 $ 196,000