Milden Company is a merchandiser that plans to sell 35,000 units during the next quarter at a selling price of $56 per unit. The company also gathered the following cost estimates for the next quarter:
Cost | Cost Formula | ||
Cost of good sold | $26 per unit sold | ||
Advertising expense | $183,000 per quarter | ||
Sales commissions | 6% of sales | ||
Shipping expense | $57,000 per quarter + $4.00 per unit sold | ||
Administrative salaries | $93,000 per quarter | ||
Insurance expense | $10,300 per quarter | ||
Depreciation expense | $63,000 per quarter | ||
Required:
1. Prepare a contribution format income statement for the next quarter.
2. Prepare a traditional format income statement for the next quarter.
1) Contribution format income statement
Sales (35000*56) | 1960000 | |
Less: Variable expense | ||
Cost of goods sold (35000*26) | 910000 | |
Sales commission | 117600 | |
Shipping expense | 140000 | |
Total Variable expense | 1167600 | |
Contribution margin | 792400 | |
Less: Fixed expense | ||
Advertising expense | 183000 | |
Shipping expense | 57000 | |
Administrative salaries | 93000 | |
Insurance expense | 10300 | |
Depreciation expense | 63000 | |
Total Fixed expense | 406300 | |
Net income | 386100 |
2) Traditional income statement
Sales (35000*56) | 1960000 | |
Cost of goods sold (35000*26) | 910000 | |
Gross profit | 1050000 | |
Less: Selling expense | ||
Advertising expense | 183000 | |
Sales commission | 117600 | |
Shipping expense | 197000 | 497600 |
Less: Administrative expense | ||
Administrative salaries | 93000 | |
Insurance expense | 10300 | |
Depreciation expense | 63000 | 166300 |
Total Selling and administrative expense | 663900 | |
Net income | 386100 |
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