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Todrick Company is a merchandiser that reported the following information based on 1,000 units sold 195, 000 13,000 130,000 $6,500 Sales Beginning merchandise inventory Purchases Ending merchandise inventory Fixed selling expense Fixed administrative expense Variable selling expense Variable administrative expense Contribution margin Net operating income $7,800 $9,750 $ 39,000 11,700 Required 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. Calculate the contribution margin per unit. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales?

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Answer #1
1 Todrick Company
Contribution Format Income Statement
Sales $195000
Variable expenses:
Cost of goods sold ($13000 + $130000 - $6500) 124800
Selling expense 9750
Administrative expense ($156000 - $124800 - $9750) 21450
Total variable expenses ($195000 - $39000) $156000
Contribution margin $39000
Fixed expenses:
Selling expense ($27300 - $7800) $19500
Administrative expense $7800
Total fixed expense ($39000 - $11700) $27300
Net operating income $ $11700
2 Todrick Company
Traditional Income Statement
Sales $195000
Cost of goods sold $124800
Gross profit $70200
Selling and administrative expenses:
Fixed selling expense $19500
Variable selling expense $9750
Fixed administrative expense $7800
Variable administrative expense $21450 $58500
Net operating income $ $11700
3 Selling price per unit ($195000/1000) $195
4 Variable cost per unit ($156000/1000) $156
5 Contribution margin per unit ($195 - $156) $39
6 Contribution income statement
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