Question

Milden Company is a merchandiser that plans to sell 29,000 units during the next quarter at a selling price of $54 per unit. The company also gathered the following cost estimates for the next quarter: Cost Cost of good sold Advertising expense Sales commissions Shipping expense Administrative salaries Insurance expense Depreciation expense Cost Formula $24 per unit sold $174,000 per quarter 5% of sales $84,000 per quarter + $4.00 per unit sold $84,000 per quarter $9,400 per quarter $54,000 per quarter Required: 1. Prepare a contribution format income statement for the next quarter. 2. Prepare a traditional format income statement for the next quarter.

Answer 1

	Milden company
	Contribution format Income statement
	Sales (29,000 units X $54)		$ 15,66,000
Less:	Variable cost
	Cost of goods sold (29,000 units X $24)	$   6,96,000
	Sales commission ($1566000 X 5%)	$       78,300
	Shipping Expense (29,000 units X $4)	$   1,16,000
	Total Variable cost		$   8,90,300
	Contribution margin		$   6,75,700
Less:	Fixed cost
	Administrative salaries	$       84,000
	Advertising expense	$   1,74,000
	Shipping expense	$       84,000
	Depreciation expense	$       54,000
	Insurance Expense	$         9,400
	Total Fixed cost		$   4,05,400
	Net Income		$   2,70,300
	Milden company
	Traditional format Income statement
	Sales (29,000 units X $54)		$ 15,66,000
Less:	Cost of goods sold (29,000 units X $24)		$   6,96,000
	Gross Profit		$   8,70,000
Less:	Operating expense
	Sales commission ($1566000 X 5%)	$       78,300
	Shipping Expense (29,000 units X $4) + $84000	$   2,00,000
	Administrative salaries	$       84,000
	Advertising expense	$   1,74,000
	Depreciation expense	$       54,000
	Insurance Expense	$         9,400
	Total operating expense		$   5,99,700
	Net Income		$   2,70,300