Question

Milden Company is a merchandiser that plans to sell 41,000 units during the next quarter at a selling price of $66 per unit. The company also gathered the following cost estimates for the next quarter: 30 points Cost Cost of good sold Advertising expense Sales commissions Shipping expense Administrative salaries Insurance expense Depreciation expense Cost Formula $33 per unit sold $189,000 per quarter 6% of sales $39,000 per quarter + $4.00 per unit sold $99,000 per quarter $10,900 per quarter $69,000 per quarter eBook Print References Required: 1. Prepare a contribution format income statement for the next quarter. 2. Prepare a traditional format income statement for the next quarter. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a contribution format income statement for the next quarter.

Answer 1

1	Contribution Format Income Statement
	Sales		$2,706,000	(41,000*66)
	Less: Variable Cost of Goods sold		$1,353,000	(41,000*33)
	Gross contribution margin		$1,353,000
	Less : Variable marketing and admin expenses		$326,360
	a) Variable selling expenses - Sales commision 6% of sales
	Sales commision 6% of sales	$162,360		(Sales commision is changes with change in sales, hence it is variable) 2,706,000*6%
	Shipping expense @4 per unit	$164,000
	Contribution Margin		$1,026,640
	Less: Fixed expenses(both manufacturing and non manufacturing)		$406,900
	a) Fixed Selling expense-
	Advertising expense	$189,000		(Advertising expense is $189,000 per quarter, hence it's fixed)
	shipping expense - fixed	$39,000		(Shipping expnese 39,000 per quarter does not change with sales volume hence it's fixed)
	b) Fixed Admin expense
	Admin salary	$99,000
	Insurance	$10,900
	Depreciation	$69,000
	Net Profit		$619,740

2	Traditional income statement
	Sales		$2,706,000	(41000*66)
	Less: Cost of Goods sold		$1,353,000	(41000*33)
	Gross Profit		$1,353,000
	Selling and admin expenses		$733,260
	Sales commision	$162,360		(2,706,000*6%)
	Shipping expense	$164,000		(41000*4)
	Advertising expense	$189,000
	Shipping expense - fixed	$39,000
	Admin salary	$99,000
	Insurance expense	$10,900
	Depreciation	$69,000
	Net profit		$619,740