Question

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Exercise 1-6 Traditional and Contribution Format Income Statements [LO1-6) Cherokee Inc. is a merchandiser that provided the following information: Amount 14,000 18 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 $ 22,000 $ 13,000 $ 9,000 $ 23,000 $ 89,000 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 1 Required 2 Prepare a traditional income statement. Cherokee, Inc. Traditional Income Statement Selling and administrative expenses: Required 1 Required 2 >

Answer 1

1]	TRADITIONAL INCOME STATEMENT
	Sales [14000*18]		$    2,52,000
	Cost of goods sold [9000+89000-23000]		$       75,000
	Gross margin		$    1,77,000
	Selling and administrative expenses:
	Selling expenses [22000+14000*1]	$         36,000
	Administrative expenses [13000+14000*1]	$         27,000
	Total selling and administrative expenses		$       63,000
	Net operating income		$    1,14,000
2]	CONTRIBUTION FORMAT INCOME STATEMENT
	Sales		$    2,52,000
	Variable expenses:
	Cost of goods sold	$         75,000
	Administrative expenses	$         14,000
	Selling expenses	$         14,000
	Total variable expenses		$    1,03,000
	Contribution margin		$    1,49,000
	Fixed expenses:
	Administrative expenses	$         13,000
	Selling expenses	$         22,000
	Total fixed expenses		$       35,000
	Net operating income		$    1,14,000