Question

Milden Company is a merchandiser that plans to sell 27,000 units during the next quarter at a selling price of $56 per unit. The company also gathered the following cost estimates for the next quarter:

Cost	Cost Formula
Cost of good sold	$26 per unit sold
Advertising expense	$176,000 per quarter
Sales commissions	5% of sales
Shipping expense	$34,000 per quarter + $6.00 per unit sold
Administrative salaries	$86,000 per quarter
Insurance expense	$9,600 per quarter
Depreciation expense	$56,000 per quarter

Required:

1. Prepare a contribution format income statement for the next quarter.

2. Prepare a traditional format income statement for the next quarter.

Answer 1

a Confribution, format income slalement. Milden Company Contribution Format Income Statemen - For the Next Quarter sales $1912.000 Variable expenses. cost of goods sold__ 702000 Sales commissioni $_75,600 Shipping expenses $ 162.000 $ 939,600 5572 400 Tolal variable ezpenses _Contribution mangin fixed expenses e __Adverslising expenses Shipping expense --Administrative salaries Insurance expense. - Depreciation expense $_176,000 $ 34,000 $_$6,000 g_4.600 1956,000 Idal fixed expenses $361600 Explore Ned Operating income $ 210,800 1. Sales = [ 27000 units X $ 56 per unit) = $15,12,000 Costogoods sold = (a7000 x $36) = $ 702000 Sales commission = ($1512000X 5..): $ 75,600 4. Shippin Shipping expenses - (1000X $6.00 $ 162000

Traditional formad income statement Melden Company - Traditional format to come blaſement _ fore the Nerd Quacler__ Sales 1$. 1516,000 cost of goods sold S_702000 - Gross Mangin $ 810.000 Selling and administrative expenses. Advertising expense $_376.000 _ Administrative salaries 1986,000 Insunance expense $ 9600 Depнecia-icon expense. — Salee commission 75,600 shopping expense $ 196,000 _ 56,000 TolalSelling and administrative expenses $ 599,200 - Ned Operating Income 9 330,800 Explanations : 1. Sales - (a1000 x856) 081512000 2. Cost of goer's sold - ( 21000 x 926) = $702000 3. Sales commission = ($1512000 x 5./9- $ 75 600 4. Shipping expense = [f34000+(86.00X97000)] = ($34000 + $ 162000) = $196000