Perez Modems, Inc. makes modem cards that are used in notebook computers. The company completed t… 1 answer below »

Perez Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during 2017. All purchases and sales were made with cash.

Acquired $860,000 of cash from the owners.

Purchased $325,000 of manufacturing equipment. The equipment has a $41,000 salvage value and a four-year useful life.

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The company started and completed 6,100 modems. Direct materials purchased and used amounted to $51 per unit.

Direct labor costs amounted to $36 per unit.

The cost of manufacturing supplies used amounted to $15 per unit.

The company paid $61,000 to rent the manufacturing facility.

Perez sold all 6,100 units at a cash price of $175 per unit.

The sales staff was paid a $11.5 per unit sales commission.

Paid $50,000 to purchase equipment for administrative offices. The equipment was expected to have a $4,100 salvage value and a three-year useful life.

Administrative expenses consisting of office rental and salaries amounted to $95,625.

Required

Use the following partially completed form to prepare an income statement using the contribution margin format.

Use the following partially completed form to prepare an income statement using the contribution margin format.

PEREZ MODEMS, INC.

Income Statement

For the Year Ended December 31, 2017

Sales revenue

$1,067,500

Variable costs:

Direct labor

Direct materials

Manufacturing supplies

Sales commission

Total variable costs

Contribution margin

375,150

Fixed costs:

Rent for manufacturing facility

Administrative expenses

Depreciation on administrative equipment

Depreciation on manufacturing equipment

Total fixed costs

Net income

$132,225

 

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