Question

Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,504 per unit and then sells them to retail customers for an average price of $2,100 each. The company's selling and administrative costs for a typical month are presented below: Cost Formula Costs Selling: Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities $968 per month $4,811 per month, plus 4% of sales $59 per piano sold $666 per month $4,964 per month Administrative: Executive salaries Insurance Clerical Depreciation of office equipment $13,587 per month $685 per month $2,451 per month, plus $37 per piano sold $886 per month During August, Marwick's Pianos, Inc., sold and delivered 58 pianos. Required: 1. Prepare a traditional format income statement for August. 2. 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. Complete this question by entering your answers in the tabs below Required1 Required 2 Prepare a traditional format income statement for August. (A "Net operating loss should be entered as a negative number.) Marwick's Pianos, Inc. Traditional Income Statement For the Month of August Selling and administrative expenses: Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total selling and administrative expenses 0

Answer 1

There are two approaches to calculate income statement

• Traditional format - In traditional format there is no classification of fixed and variable cost.
• Contribution Format - In this format Fixed and variable cost is identified.