Question

The data in the table below are from the Acme Corporation, a merchandiser.

		Amount
Number of units sold		11,000
Selling price per unit	$	18
Variable selling expense per unit	$	2
Variable administrative expense per unit	$	2
Total fixed selling expense	$	19,000
Total fixed administrative expense	$	15,000
Beginning merchandise inventory	$	12,000
Ending merchandise inventory	$	25,000
Merchandise purchases	$	90,000

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer - Part 1) Acme Corporation Traditional Income Statement 198000 Sales Revenue Cost of goods sold * Beginning inventory Purchases Less ending inventory 12000 90000 25000 1 Gross Margin 2 Variable selling and adminstrative expenses ((2+2)*11000) 3 Fixed selling and adminstrative expenses (19000+15000) 770001 1210001 44000 34000 5 Net Profit 43000 7 Part 2) Acme Corporation Contribution Income Statement Sales Revenue 1 Variable cost of goods sold (12000+90000-25000) 2 Variable selling and adminstrative expenses (2+2)*11000) 3 Contribution Margin 4 Fixed selling and adminstrative expenses (19000+15000) 5 Net Operating Income 198000 77000 44000 77000 34000 43000