Question

Amount 20,000 30 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 2 $ 40,000 $ 30,000 $ 24,000 $ 44,000 $ 180,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a traditional income statement. Cherokee, Inc. Traditional Income Statement Selling and administrative expenses:

Answer 1

	Traditional income statement
sales	(20000*30)					600000
cost of goods sold		(24000+180,000-44,000)				160000
Gross margin						440000
Selling and administrative expense
selling expense		(20000*4+40000)			120000
Administrative expense		(20000*2+30000)			70000	190000
Net operating income						250000
	Contribution Format income statement
Sales						600,000
Variable expense
cost of goods sold					160,000
Selling expenses					80,000
Administrative expense					40,000	280,000
contribution margin						320,000
Fixed expenses:
Selling expenses					40,000
Administrative expense					30,000	70,000
net operating income						250,000