Contribution Format Income Statement Example

Harris Company manufactures and sells a single product. Let’s prepare a contribution format income statement for the year, assuming the company produces and sells 99,000 units at a selling price of $9.08 per unit.

Data Needed:

• Selling Price per Unit: $9.08
• Units Sold: 99,000
• Variable Cost per Unit: $5 (hypothetical value for illustration)
• Fixed Costs: $55,000

Contribution Format Income Statement

1. Sales Revenue:

   $Sales=Selling Price per Unit\times Units\; Sold$$Sales=9.08\times 99,000=898,920$

2. Variable Costs:

   $Variable Costs=Variable Cost per Unit\times Units\; Sold$$Variable Costs=5\times 99,000=495,000$

3. Contribution Margin:

   $Contribution Margin=Sales-Variable Costs\backslash text\{Contribution\; Margin\}\; =\; \backslash text\{Sales\}\; –\; \backslash text\{Variable\; Costs\}$
   $Contribution Margin=898,920-495,000=403,920\backslash text\{Contribution\; Margin\}\; =\; 898,920\; –\; 495,000\; =\; 403,920$
   

4. Fixed Costs:

   $Fixed Costs=55,000$

5. Net Operating Income:

   $\backslash text\{Net\; Operating\; Income\}\; =\; \backslash text\{Contribution\; Margin\}\; –\; \backslash text\{Fixed\; Costs\}$Net Operating Income=Contribution Margin−Fixed Costs

   Net Operating Income=403,920−55,000=348,920