Question

Marwick's Pianos, Inc, purchases pianos from a large manufacturer for an average cost of $2.450 per unit and then sells them to retail customers for an average price of $3,125 each. The company's selling and administrative costs for a typical month are presented below Costs Selling: Cost Formula Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities $700 per month $950 per month, plus 8% of sales $30 per piano sold $350 per month $800 per month Administrative: Executive salaries Insurance Clerical Depreciation of office equipment $2,500 per month $400 per month $1,800 per month, plus $28 per piano sold $300 per month During August, Marwick's Pianos, Inc., sold and delivered 40 pianos Required: 1. Prepare a traditional format income statement for August. 2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.

Answer 1

Marwick's Pianos Inc
Traditional Income Statement
For the Month of August
Sales revenue		$   1,25,000.00
Less: Cost of Goods sold		$       98,000.00
Gross Profit		$       27,000.00
Selling and Administrative Expense
Selling Expenses
Advertising	$             700.00
Sales salaries and Commission	$       10,950.00
Delivery Expense	$          1,200.00
Utilities	$             350.00
Depreciation of sales facility	$             800.00
Total Selling Expenses	$       14,000.00
Administrative Expenses
Executive Salaries	$          2,500.00
Insurance	$             400.00
Clerical	$          1,800.00
Depreciation- Office Equipment	$             300.00
Total Administrative expenses	$          5,000.00
Total Selling and Administrative Expenses		$      19,000.00
Net income		$         8,000.00

Marwick's Pianos Inc
Contribution formal Income statement
For the Month of August
	Total	Per Piano
Sales	$    1,25,000.00	$         3,125.00
variable Expenses
Direct material cost	$       98,000.00	$         2,450.00
Variable Sales salaries and Commission	$       10,000.00	$             161.29
Delivery Expenses	$          1,200.00	$               30.00
Clerical	$             800.00	$               20.00
Total Variable Cost	$    1,10,000.00	$         2,750.00
Contribution Margin	$       15,000.00	$             375.00
Fixed costs
Advertising	$             700.00
Fixed Sales salaries and Commission	$             950.00
Utilities	$             350.00
Depreciation- Sales Facility	$             800.00
Executive salaries	$          2,500.00
Insurance	$             400.00
Clerical fixed cost	$          1,000.00
Depreciation- Office equipment	$             300.00
Total Fixed cost	$          7,000.00
Net Income	$          8,000.00