Flavol Corporation Reported Sales Revenues of $1,850,000 for the Period

question 86

Essay

Flavol Corporation reported sales revenues of $1,850,000 for the period just ended. Cost of goods sold, selling expenses, and administrative expenses totaled $1,200,000, $280,000, and $170,000, respectively. A detailed analysis of the latter three amounts revealed respective fixed cost components of $780,000, $60,000, and $130,000.
A. Determine the amounts, if any, that Flavol would report on a traditional income statement for (1) gross margin, (2) contribution margin, and (3) income.
B. Determine the amounts, if any, that Flavol would report on a contribution income statement for (1) gross margin, (2) contribution margin, and (3) income.
C. Which of the two income statements (traditional or contribution) is more useful for studying a company's cost-volume-profit relationships?

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Definitions:

Reverse Auction

A buying process in which sellers lower their prices in competition for the buyer's purchase, reversing the traditional auction.

Number Of Sellers

refers to the total count of individuals or entities offering a particular product or service in the market.

Price Decreases

A strategy of reducing the cost of goods or services, often used to boost sales volume or clear inventory.

NAICS

The North American Industry Classification System, a standard used by federal statistical agencies for classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.