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29 December, 15:06

The traditional income statement for Pace Company shows sales $900,000, cost of goods sold $600,000, and operating expenses $200,000. Assuming all costs and expenses are 70% variable and 30% fixed, prepare a CVP income statement through contribution margin.

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  1. 29 December, 15:15
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    net income = $100000

    Explanation:

    given data

    sales = $900,000

    cost of goods = $600,000

    operating expenses = $200,000

    variable = 70%

    fixed = 30%

    solution

    CVP income statement

    sales = $900,000

    total variable cost = sales - (cost of good sold) - (operating expenses)

    total variable cost = $900,000 - ($600,000 * 70%) - ($200,000 * 70%)

    total variable cost = $560000

    and

    contribution is $340000

    fixed cost = (cost of good sold) - (operating expenses)

    fixed cost = ($600,000 * 30%) - ($200,000 * 30%)

    fixed cost = $240000

    so net income is = contribution - fixed cost

    net income is = $340000 - $240000

    net income = $100000
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