Question

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Problem 1-19 Traditional and Contribution Format Income Statements (LO1-6] Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales Beginning merchandise inventory Purchases Ending merchandise inventory Fixed selling expense Fixed administrative expense Variable selling expense Variable administrative expense Contribution margin Net operating income $450,000 $ 30,000 $300,000 $ 15,000 $ ? $ 18,000 $ 22,500 $ 90,000 $ 27,000 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 1 Reg 2 Req 3 to Req 6 Prepare a traditional format income statement. Todrick Company Traditional Income Statement Selling and administrative expenses: < Reg 1 Req 3 to 5 >

Answer 1

	Contribution format income statement
					Amount	amount
	Sales					450,000
	less:Variable expenses
	Cost of goods sold				315000
	Variable selling expense				22,500
	variable administrative expense				22,500	360,000
	contribution margin					90,000
	less:Fixed expense
	fixed administrative expense				18,000
	fixed selling expense				45,000	63,000
	net operating income					27,000
	Traditional income statement
	sales					450,000
	less cost of goods sold					315000
	Gross profit					135,000
	Selling and administrative expense
	Selling expense				67,500
	Administrative expense				40,500	108,000
	Net operating income					27,000
	3	Selling price per unit			450
	4	Variable cost per unit			360
	5	Contribution margin per unit			90
	6)	Contribution format