Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,486 per unit and then sells them to retail customers for an average price of $2,700 each. The company’s selling and administrative costs for a typical month are presented below:
Costs | Cost Formula | |
Selling: | ||
Advertising | $ | 934 per month |
Sales salaries and commissions | $ | 4,774 per month, plus 4% of sales |
Delivery of pianos to customers | $ | 61 per piano sold |
Utilities | $ | 653 per month |
Depreciation of sales facilities | $ | 4,963 per month |
Administrative: | ||
Executive salaries | $ | 13,504 per month |
Insurance | $ | 683 per month |
Clerical | $ | 2,516 per month, plus $38 per piano sold |
Depreciation of office equipment | $ | 947 per month |
During August, Marwick’s Pianos, Inc., sold and delivered 57 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.
Prepare a traditional format income statement for August. (A "Net operating loss" should be entered as a negative number.)
|
Traditional Income Statement: | ||||||
Sales revenue (57 units @ 2700) | 153900 | |||||
Less: Cost of goods sold (57 units @ 1486) | 84702 | |||||
Gross Profit | 69198 | |||||
Selling and Admin expenses | ||||||
Selling expenses | ||||||
Advertising | 934 | |||||
Sales salaries and commission (153900*4% +4774) | 10930 | |||||
Delivery of Pianos (57*61) | 3477 | |||||
Utilities | 653 | |||||
Depreciation of sales facilities | 4963 | |||||
Total Selling expense | 20957 | |||||
Admin expenses: | ||||||
Executive salaries | 13504 | |||||
Insurance expenses | 683 | |||||
Clerical (57*38+2516) | 4682 | |||||
Depreciation of equipment | 947 | |||||
Total Admin expenses | 19816 | |||||
Total selling and admin expenses | 40773 | |||||
Net income | 28425 | |||||
Contribution margin Income Statement: | ||||||
Total | Cost per unit | |||||
Sales revenue | 153900 | 2700 | ||||
Less: Variable cost | ||||||
Cost of goods sold | 84702 | 1486 | ||||
Sales salaries and commission | 6156 | 108 | ||||
Delivery of Piano | 3477 | 61 | ||||
Clerical expense | 2166 | 38 | ||||
Total Variable cost | 96501 | 1693 | ||||
Cntribution Margin (Sales -Total variable cost) | 57399 | 1007 | ||||
Less: Fixed cost | ||||||
Advertising | 934 | |||||
Sales salaries | 4774 | |||||
Utilities | 653 | |||||
Depreciation of sales facilities | 4963 | |||||
Executive salaries | 13504 | |||||
Insurance expenses | 683 | |||||
Clerical expense | 2516 | |||||
Depreciation on Equipment | 947 | |||||
Total fixed cost | 28974 | |||||
Net Income | 28425 | |||||
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