Question

Cherokee Inc. is a merchandiser that provided the following information: 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 12,000 S 16.00 $ 2.0 S 1.00 $ 19,000 S 15,000 $ 11,000 S 24,000 $ 87,000 Required: 1. Prepare a traditional income statement. CHEROKEE, INC. Traditional Income Statement Selling and administrative expenses:

Answer 1

1
Traditional Income Statement
Sales		192000	=12000*16
Cost of goods sold		74000	=11000+87000-24000
Gross margin		118000
Selling and administrative expenses:
Selling expenses	43000		=19000+(12000*2)
Administrative expenses	27000		=15000+(12000*1)
		70000
Net operating income		48000
2
Contribution Format Income Statement
Sales		192000
Variable expenses:
Cost of goods sold	74000		=11000+87000-24000
Selling expenses	24000		=12000*2
Administrative expenses	12000		=12000*1
		110000
Contribution margin		82000
Fixed expenses:
Selling expenses	19000
Administrative expenses	15000
		34000
Net operating income		48000