Question

6 Cherokee Inc. is a merchandiser that provided the following information Amount 10,000 18 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 $ 18,000 15,000 11,000 26,000 87,000 Print 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 Required 2

Answer 1

1.

Cherokee Inc. Traditional Income Statement
Sales		$ 180,000
Cost of Goods Sold		72,000
Gross Margin		108,000
Selling and Administrative Expenses
Variable Selling	10,000
Fixed Selling	18,000
Variable Administrative	10,000
Fixed Administrative	15,000
Total Selling and Administrative Expenses		53,000
Net Operating Income		55,000

2.

Cherokee Inc. Contribution Format Income Statement
Sales		$ 180,000
Less: Variable Expenses
Cost of Goods Sold	72,000
Selling Expenses	10,000
Administrative Expense	10,000
Total Variable Expense		92,000
Contribution Margin		88,000
Fixed Costs
Selling	18,000
Administrative	15,000
Total Fixed Costs		33,000
Net Operating Income		55,000