Question

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: $ 255,000 $ 17,000 $ 170,000 8,500 Sales Beginning merchandise inventory Purchases Ending merchandise inventory Fixed selling expense Fixed adminiatrative expense Variable selling expense Variable administrative expense Contribution margin Net operating income 10,200 12,750 51,000 15,300 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? Complete this question by entering your answers in the tabs below. Req 3 to 5 Req 6 Req 1 Reg 2 Prepare a contribution format income statement. Todrick Company Contribution Format Income Statement Variable expenses: Fixed expenses:

Answer 1

Todrick Company Requirement 1 Contribution Format Sales 255000 Variable expenses: Cost of goods sold Variable selling (begin Merchandise inventory + purchase - ending merchandise inventory) 178500 12750 Variable administrative 204000 total variable expenses 12750 Contiribution margin 51000 (sales - total variable expenses) Fixed expenese: Fixed selling 25500 Fixed administrative 10200 35700 Net Operating income 15300 (Contribution margin - total fixed expenses) Requirement 2 Traditional Format Sales 255000 Cost of goods sold Gross Margin Selling and administrative expenses 178500 76500 Selling 38250 Administrative 61200 22950 Net Operating Income 15300 Requirement 3 the selling price per unit is 255000 1000 units sold 255 Requirement 4 the variable cost per unit is 204000 1000 units sold 204 Requirement 5 The contribution margin per unit is selling price per unit variable cost per unit 255 204 51 Requirement 6 The contribution format is more useful because it organizes costs based on their cost behavior The contribution format enables manages to quickly calculate how bariable costs will change in response to changes in unit sales.