Kipling Company has sales of $1,500,000 for the first quarter of 2016. In making the sales, the company incurred the following costs and expenses. Variable Fixed
Product costs $500,000 $550,000
Selling expenses 100,000 75,000
Administrative expenses 80,000 67,000
Calculate net income under CVP for 2016.

                Kipling Company

Cost volume profit (CVP) Income Statement

Revenue                                    $1,500,000

Variable costs                           ($680,000)  

Contribution margin                   $820,000

Fixed costs                                ($692,000)  

Net income                                  $128,000

Explanation:

                                              Variable      Fixed

Product costs                     $500,000   $550,000

Selling expenses                $100,000     $75,000

Administrative expenses     $80,000     $67,000

In order to prepare a CVP income statement we must first determine the total variable and total fixed costs. It is very similar to a variable costing income statement.

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