Question

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,493 per unit and then sells them to retail customers for an average price of $3,000 each. The company’s selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$	934 per month
Sales salaries and commissions	$	4,791 per month, plus 5% of sales
Delivery of pianos to customers	$	57 per piano sold
Utilities	$	664 per month
Depreciation of sales facilities	$	4,933 per month
Administrative:
Executive salaries	$	13,583 per month
Insurance	$	694 per month
Clerical	$	2,472 per month, plus $36 per piano sold
Depreciation of office equipment	$	920 per month
Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin. (A "Net operating loss" should be entered as a negative number.) Marwick's Pianos, Inc. Contribution Format Income Statement For the Month of August Total Per Piano Sales $168,000 $3,000 Variable expenses: Cost of goods sold 83,608 1,493 Sales salaries and commissions 8,400 150 Delivery of pianos 2,160 36 Clerical 3,192 57 Total variable expenses 97,360 1,736 Contribution margin $70,640 $1,264 Fixed expenses: Advertising 934 Sales salaries and commissions Utilities 664 Depreciation of office equipment 920 Depreciation of sales facilities 4,933 Insurance 694 Clerical Total fixed expenses 8,145 Net operating income

Answer 1

Solution 1:

Traditional Income Statement - Marwick Pianos Inc.
Particulars	Details	Amount
Sales ($3,000*56)		$168,000.00
Less: Cost of Goods Sold (1493*56)		$83,608.00
Gross Profit		$84,392.00
Sellling Expenses:
Advertising	$934.00
Sales Salaries and Commissions (4791 + 5% of 168000)	$13,191.00
Delivery of Pianos to customers (57*56)	$3,192.00
Utilities	$664.00
Depreciation of Sales Facilities	$4,933.00	$22,914.00
Administrative Expenses:
Executive Salaries	$13,583.00
Insurance	$694.00
Clerical (2472 + 36*56)	$4,488.00
Depreciation of office equipment	$920.00	$19,685.00
Net Income		$41,793.00

Solution 2:

Contribution margin Income Statement - Marwick Pianos Inc.
Particulars	Per Unit	Total
Sales	$3,000.00	$168,000.00
Variable Cost:
Purchase Cost	$1,493.00	$83,608.00
Sales Commission	$150.00	$8,400.00
Delivery of Pianos to customers	$57.00	$3,192.00
Clerical Expense	$36.00	$2,016.00
Contribution	$1,264.00	$70,784.00
Fixed Cost:
Advertising		$934.00
Sales Salaries		$4,791.00
Utilities		$664.00
Depreciation of Sales Facilities		$4,933.00
Executive Salaries		$13,583.00
Insurance		$694.00
Clerical		$2,472.00
Depreciation of office equipment		$920.00
Net Income		$41,793.00