Question

Search BERLAN ACC 412 Assignment 10) - Protected V. - Sawed to the PC tions Animations Slide Show Review View Help an contain vinner Unters you need to eat it's suter to stay in Protected view Enable Editing Gulded Example Otsego, Inc., is a merchandiser that provided the following information: 12,000 S25 $2.50 $2 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 Merchandise inventory, beginning balance Merchandise inventory, ending balance Merchandise purchases $16,000 $17,000 $25,000 $18,000 $101,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement. [L06

Answer 1

OTSEGO INC TRADITIONAL INCOME STATEMENT
sales revenue 12000*25)		300000
less:cost of goods sold		(108000)
Gross margin		192000
less:selling and administrative expense
selling expense	46000
Administrative expense	41000
Total selling and administrative expense		(87000)
Net operating income		105000

Working :

a)cost of goods sold :beginning inventory + purchase -ending inventory

                  = 25000 +101000 - 18000

                   = 108000

b)selling expense : variable +fixed

                (2.5*12000) + 16000

                   30000 +16000

                      46000

Administrative expense : (2*12000) + 17000

                              = 24000+17000

                              = 41000

2)

OTSEGO INC CONTRIBUTION MARGIN INCOME STATEMENT
Sales revenue		300000
less:Variable expense
cost of sales	108000
variable selling expense (12000*2.5)	30000
Variable administrative expense (12000*2)	24000
Total variable expense		(162000)
Contribution margin		138000
Less:Fixed cost
selling expense	16000
Administrative expense	17000
Total fixed cost		(33000)
Net operating income		105000