Question

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Cherokee Inc. is a merchandiser that provided the following information: Amount 14,000 18 1 es es es 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 $ 22,000 $ 13,000 $ 9,000 $ 23,000 $ 89,000 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 1 Required 2 Prepare a contribution format income statement. Cherokee, Inc. Contribution Format Income Statement Variable expenses: Fixed expenses:

Answer 1

1	Traditional income statement
	Sales		252,000	(14000*18)
	Less: Cost of Goods sold		75000	(9000+89000-23000)
	Gross Profit		177,000
	Less: Marketing and administrative expenses(fixed and variable)		63,000
	a) Variable selling expenses	14,000		(14000*1)
	b) Variable admin expenses	14,000		(14000*1)
	c) Fixed Selling expense	22,000
	d) Fixed Admin expense	13,000
	Net profit		114,000
2	Contribution Format Income Statement
	Sales		252,000	(14000*18)
	Less: Variable Cost of Goods sold		75000	(9000+89000-23000)
	Gross contribution margin		177,000
	Less : Variable marketing and admin expenses		28,000
	a) Variable selling expenses	14,000		(14000*1)
	b) Variable admin expenses	14,000		(14000*1)
	Contribution Margin		149,000
	Less: Fixed expenses(both manufacturing and non manufacturing)		35,000
	a) Fixed Selling expense	22,000
	b) Fixed Admin expense	13,000
	Net Profit		114,000

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