Question

Amount 13,000 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 Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 21,000 $ 15,000 $ 9,000 $ 25,000 $ 90,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a contribution format income statement. 208,000 Cherokee, Inc. Contribution Format Income Statement Sales IS Variable expenses: Cost of goods sold $ 74,000 Selling expenses 26,000 Administrative expenses 13,000 Variable manufacturing overhead 113,000

Answer 1

Answer

• Requirement 2 asked

Cherokee Inc
Contribution format income statement
Sales		$208,000
Variable expenses:
Cost of Goods Sold	$74,000
Selling Expenses	$26,000
Administrative expenses	$13,000
		$113,000
Contribution margin		$95,000
Fixed Expenses:
Selling Expenses	$21,000
Administrative expenses	$15,000
		$36,000
Net Operating Income (Loss)		$59,000

• Other workings

Cost of Goods Sold = $ 9000 + $ 90000 - $ 25000

Variable expenses = 13000 units sold x Variable cost per unit

Cherokee Inc
Traditional Income Statement
Sales		$208,000
Cost of Goods Sold		$74,000
Gross Margin		$134,000
Selling & Administrative expense:
Administrative expense	$47,000
Selling expense	$28,000
		$75,000
Net Operating Income (Loss)		$59,000