Question

Cherokee Inc. is a merchandiser that provided the following information Amount 12,000 16 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 $ 22,000 $87,000 Required 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement. Complete this question by entering your answers in the tabs below Required 1Required 2 Prepare a traditional income statement. Cherokee, Inc Traditional Income Statement Sales $192,000 Selling and administrative expenses 31,000 Selling expenses Administrative expenses 28,000 59,000 < Required! Required 2>

Answer 1

Ans-1- Cherokee Inc.

Traditional Income Statement

Sales	(12,000 units * $16)		$192,000
Less: Cost of Goods sold	($9,000+$87,000-$22,000)		$74,000
Gross Margin			$118,000
Selling and Administrative Expenses:
Selling Expenses	($1 *12,000 units) + $19,000	$31,000
Administrative Expenses	($1 *12,000 units)+$16,000	$28,000
Total Selling and Administrative Expenses			$59,000
Net Operating Income			$59,000

2- Cherokee Inc.

Contribution Format Income Statement

Sales (12,000 units *$16)		$192,000
Less: Variable Expenses:
Cost of Goods Sold ($9,000+$87,000-$22,000)	$74,000
Selling Expenses (12,000 units *$1)	$12,000
Administrative Expenses (12,000 units *$1)	$12,000
Total Variable Expenses		$98,000
Contribution Margin		$94,000
Fixed Expenses:
Selling Expenses	$19,000
Administrative Expenses	$16,000
Total Fixed Expenses		$35,000
Net Operating Income		$59,000

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