Question

Cherokee Inc. is a merchandiser that provided the following information: Amount 11,000 17 Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 19,000 $ 16,000 $ 9,000 $ 24,000 $ 88,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format Income statement.

Answer 1

Cherokee Inc Traditional Income statement Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses 187000 73000 114000 41000 38000 Total selling and administrative expenses Net operating income 790001 35000

187000 73000 22000 22000 Cherokee Inc Contribution format Income statement Sales Variable Expenses: Cost of goods sold Selling expenses (units sold * Selling price per unit) administrative expenses Total variable expenses Contribution margin Fixed Expenses: Selling expenses Administrative expenses Total Fixed expenses Net Operating Income 117000 70000 19000 16000 35000 35000