Question

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,488 per unit and then sells them to retail customers for an average price of $3,400 each. The company’s selling and administrative costs for a typical month are presented below:

Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,488 per unit and then sells them to retail customers for an average price of $3,400 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 Administrative: Executive salaries Insurance Clerical Depreciation of office equipment $961 per month $4,809 per month, plus 3% of sales $63 per piano sold $641 per month $4,934 per month $13,414 per month $717 per month $2,501 per month, plus $36 per piano sold $853 per month During August, Marwick's Pianos, Inc., sold and delivered 64 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.

Answer 1

Solution 1:

Traditional Income Statement - Marwick Pianos Inc.
Particulars	Details	Amount
Sales ($3,400*64)		$217,600.00
Less: Cost of Goods Sold (1488*64)		$95,232.00
Gross Profit		$122,368.00
Sellling Expenses:
Advertising	$961.00
Sales Salaries and Commissions (4809 + 3% of 217600)	$11,337.00
Delivery of Pianos to customers (64*63)	$4,032.00
Utilities	$641.00
Depreciation of Sales Facilities	$4,934.00	$21,905.00
Administrative Expenses:
Executive Salaries	$13,414.00
Insurance	$717.00
Clerical (2501 + 36*64)	$4,805.00
Depreciation of office equipment	$853.00	$19,789.00
Net Income		$80,674.00

Solution 2:

Contribution margin Income Statement - Marwick Pianos Inc.
Particulars	Per Unit	Total
Sales	$3,400.00	$217,600.00
Variable Cost:
Purchase Cost	$1,488.00	$95,232.00
Sales Commission	$102.00	$6,528.00
Delivery of Pianos to customers	$63.00	$4,032.00
Clerical Expense	$36.00	$2,304.00
Contribution	$1,711.00	$109,504.00
Fixed Cost:
Advertising		$961.00
Sales Salaries		$4,809.00
Utilities		$641.00
Depreciation of Sales Facilities		$4,934.00
Executive Salaries		$13,414.00
Insurance		$717.00
Clerical		$2,501.00
Depreciation of office equipment		$853.00
Net Income		$80,674.00