Question

Cherokee Inc. is a merchandiser that provided the following information:

	Amount
Number of units sold		12,000
Selling price per unit	$	15
Variable selling expense per unit	$	1
Variable administrative expense per unit	$	1
Total fixed selling expense	$	22,000
Total fixed administrative expense	$	16,000
Beginning merchandise inventory	$	10,000
Ending merchandise inventory	$	25,000
Merchandise purchases	$	90,000

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.

Answer 1

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Date Page 1) Traditional income statement Sales (18000X1s) | Cost of goods sold ha180000 lai (75000) Gross margen 105ooo Selling & admin exp Selling expenses Variche (12000 x1)| 2000 Fixed | 22000, (34000) Admin expenses 2000* 16000, (28000) Wet operating income 43000 Note À : Cost of goods sold 12000 variable (12000 X ) Fixed Opening inventory = $10000 Add: Purchasee = $ 10000 Less : Ending inventory = ($25000) Cost of goods sold = $75000

Contribution statement format income sale (12000x 15) 180000 Less : Variable Cost Cost of goods sold Variable selling cost Variable admin cost 75000 12000 12000 (99000) Contribution marges 81000 Less : Fixed Cost Selling expenses Admén expenses 22000 16000 net income 43000