Ava's Hats Is a Small E-Tail Business Specializing in the Hand

question 286

Essay

Ava's Hats is a small e-tail business specializing in the hand crocheted hats for infants and toddlers over the web.The business is owned by a sole proprietor and operated out of her home.Results for last year are as follows:

For internal planning and decision-making purposes,the owner of Ava's Hats would like to translate the company's income statement into the contribution margin format.Since Ava's Hats is an e-tailer,all of its cost of goods sold was variable.A large portion of the selling and marketing expenses consisted of freight-out charges ($16,500),which were also variable.Only 25% of the remaining selling and marketing expenses and 20% of the website expenses were variable.Of the other operating expenses,90% were fixed.
Based on this information,prepare Ava's Hats' contribution margin income statement for last year.

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Definitions:

Distinct Groups

Collections of individuals separated by clear, defined characteristics or criteria that set them apart from others.

Different-Colored Uniforms

Uniforms that differ in color among individuals or teams, used to distinguish between different groups in various settings, such as sports.

Intersecting Lines

Lines that meet or cross at one point, sharing exactly one point in common.

Visual Cliff

A psychological experimental apparatus that uses a visual illusion to examine perception and understanding of depth in infants.