Question

Cherokee Inc. is a merchandiser that provided the following information: Amount 11,000 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 $ 18,000 $ 13,000 $ 10,000 $ 24,000 $ 85,000 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 traditional income statement. Cherokee, Inc. Traditional Income Statement Selling and administrative expenses: Required 2 >

Answer 1

1)

	traditional income statement
	particulars		amount($)
	sales(11000 unitsx$17)		187000
less:	cost of goods sold		71000
	gross margin		116000
less:	selling and administrative expenses
	variable selling expenses(11000*1)	11000
	variable administrative expenses(11000*1)	11000
	total fixed selling expenses	18000
	total fixed administrative expenses	13000	53000
	net operating income		63000

cost of goods sold=opening stock of merchandise+purchase-closing stock of merchandise

2)

	contribution format income statement
	particulars		amount($)
	sales(11000 unitsx$17)		187000
less:	variable expenses:-
	cost of goods sold	71000
	variable selling expenses(11000*1)	11000
	variable administrative expenses(11000*1)	11000	93000
	contribution margin		94000
less:	fixed expenses
	total fixed selling expenses	18000
	total fixed administrative expenses	13000	31000
	net oprating income		63000