Individual Project One Template

Individual Project One Template

Part 1: Summarize what a contribution format income statement depicts, as compared to the traditional format.

Please discuss

Part 2: Using the following company data, show how the two income statement formats would look side by side.

Traditional- versus contribution-format statements are as follows:

Traditional format
Gross margin


Calculation of cost of goods sold


Variable cost as a 60% of sales (need to be calculated) +Fixed costs of manufacturing (given)


Contribution format
2. Variable COGS
Other variable expenses
=Contribution margin
Fixed COGS
Other Fixed costs



Variable COGS

Variable cost as a 60% of sales (need to be calculated)

Part 3: Explain why the contribution approach is more useful to project profits. As an example, show your calculations when using a projected sales increase of 20%.

Please discuss and make the following calculation

Contribution margin
3. Fixed costs
Projected profit


3. Fixed cost =

Fixed costs of manufacturing + Fixed selling and administrative costs

Part 4: Using the following data, show how expected profits would be different if there was a sales increase of 10% and she used variable COGS of 50% vs. 60%. As an offset, this implies an increase in fixed COGS of $1,000,000.


60% COGS 50% COGS
Sales with 10% increase
Less: Variable COGS
Less: Other variable costs
Contribution margin
Fixed COGS
Other fixed costs

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