Question

Problem 1-19 Traditional and Contribution Format Income Statements [LO1-6) 3 Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: 300,000 20,000 s 200,000 ,000 Sales Beginning merchandise inventory Ending nerehandise inventory Fixed selling expense rixed administrative expense Variable selling expense Variable administrative expense Contribation margin Net operating income 7 03:3707 12,000 15,000 Print 60,000 18,000 1. Prepare a contribution format income statement 2. Prepare a traditional format income statement 3. Calculate the selling price per unit. 4. Calculate the variable cost per unit 5. Celculate the contribution margin per unit 6. Which income statement format (traditional format operating income wil change in responses to changes in unit sales? or contribution format) would be more useful to managers in estimating how net

Answer 1

Answer 1.
Todrick Company
Contribution Format Income Statement
Sales		300,000
Variable Expenses
Cost of Goods Sold	213,000
Selling Expenses	15,000
Administrative Expenses ($240,000 - ($213,000 + $5,000)	12,000
Total Variable Costs ($300,000 - $60,000)		240,000
Contribution Margin		60,000
Fixed Expenses
Selling Expenses - $42,000 - $30,0000	30,000
Administrative Expenses	12,000
Total Fixed Expenses - $60,000 - $18,000		42,000
Net Operating Income		18,000
Answer 2.
Todrick Company
Traditional Income Statement
Sales		300,000
Less: Cost of Goods Sold		213,000
Gross Margin		87,000
Less: Selling & Admin. Exp.
Variable Selling Expenses	15,000
Variable Administrative Expenses	12,000
Fixed Selling Expenses	30,000
Fixed Administrative Expenses	12,000	69,000
Net Operating Income		18,000
Answer 3.
Selling Price Per Unit = $300,000 (Sales) / 1,000 Units (No. of Units Sold)
Selling Price Per Unit = $300 per Unit
Answer 4.
Variable Cost per Units = $240,000 (Total Variable Cost) / 1,000 (No. of units Sold)
Variable Cost per Units = $240 per Unit
Answer 5.
Contribution Margin per Unit = $60,000 (Total Contribution) / 1,000 (No. of units Sold)
Contribution Margin per Unit = $60 per Unit
Answer 6.
Contribution Income Statement