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Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,509 per unit and then sells them to retail customers for an average price of $3,200 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 $946 per month 54,780 per month, plus 4% of $58 per piano sold $642 per month $5,055 per month $13,591 per month $718 per month $2,544 per month, plus $41 per piano sold $900 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.

Answer 1

1
Traditional Income Statement
Sales		204800	=64*3200
Cost of goods sold		96576	=64*1509
Gross Margin		108224
Selling and Administrative expenses:
Selling expenses:
Advertising	946
Sales salaries and commissions	12972		=4780+(204800*4%)
Delivery of pianos	3712		=58*64
Utilities	642
Depreciation of sales facilities	5055
Total selling expenses	23327
Administrative expenses:
Executive salaries	13591
Insurance	718
Clerical	5168		=2544+(41*64)
Depreciation of office equipment	903
Total Administrative expenses	20380
Total Selling and Administrative expenses		43707
Net operating income		64517
2
Contribution format Income Statement
	Total	Per Piano
Sales	204800	3200
Variable expenses:
Sales salaries and commissions	8192	128
Delivery of pianos	3712	58
Clerical	2624	41
Cost of goods sold	96576	1509
Total Variable expenses	111104	1736
Contribution margin	93696	1464
Fixed expenses:
Advertising	946
Sales salaries and commissions	4780
Utilities	642
Depreciation of office equipment	903
Depreciation of sales facilities	5055
Executive salaries	13591
Insurance	718
Clerical	2544
Total Fixed expenses	29179
Net operating income	64517