Fanelli Corporation, a merchandising company, reported the following results for July: Number of units sold 6,100 Selling price per unit$590 Unit cost of goods sold$413 Variable selling expense per unit$50 Total fixed selling expense$125,600 Variable administrative expense per unit$28 Total fixed administrative expense$207,500 Cost of goods sold is a variable cost in this company. Required: a. Prepare a traditional format income statement for July. b. Prepare a contribution format income statement for July.

Instructions are below.

Explanation:

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).

I will assume that there is no beginning nor ending inventory.

Absorption costing income statement:

Sales= 6,100*590= 3,599,000

COGS= (6,100*413)= (2,519,300)

Gross profit= 1,079,700

Total selling expense= (6,100*50 + 125,600)= (430,600)

Total administrative expense= (6,100*28 + 207,500)= (378,300)

Net operating income= 270,800

Variable costing income statement:

Sales= 3,599,000

Total variable cost= 6,100*(413 + 50 + 28)= (2,995,100)

Total contribution margin= 603,900

Total fixed selling expense= (125,600)

Total fixed administrative expense= (207,500)

Net operating income= 270,800

i believe it’s b because the rest don’t make sense