PROBLEM 2-14 Contribution Format versus Traditional Income Statement [LO5]House of Organs, Inc., purchases organs from a well-known manufacturer and sells them at theretail level. The organs sell, on the average, for $2,500 each. The average cost of an organ from themanufacturer is $1,500. The costs that the company incurs in a typical month are presented below: (See attached)During November, the company sold and delivered 60 organs.Required:1. Prepare a traditional income statement for November.2. Prepare a contribution format income statement for November. Show costs and revenues onboth a total and a per unit basis down through contribution margin.3. Refer to the income statement you prepared in (2) above. Why might it be misleading to showthe fixed costs on a per unit basis?
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Contribution Format versus Traditional Income Statement
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