Question

Milden Company is a merchandiser that plans to sell 35,000 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 of good sold Advertising expense Sales commissions Shipping expense Administrative salaries Insurance expense Depreciation expense Cost Formula $26 per unit sold $183, ese per quarter 6% of sales $57,eee per quarter + $4.ee per unit sold $93,889 per quarter $19,30 per quarter $63,000 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

Solution 1:

Milden Company
Contribution format Income Statement
Sales (35000*$56)		$1,960,000
Variable Expenses:
Cost of goods sold (35000*$26)	$910,000
Sales Commission (6% of sales)	$117,600
Shipping Expense (35000*$4)	$140,000
Total Variable Expenses		$1,167,600
Contribution Margin		$792,400
Fixed Expenses:
Advertising Expense	$183,000
Shipping Expense (Fixed portion)	$57,000
Administrative Salaries	$93,000
Insurance Expense	$10,300
Depreciation Expense	$63,000
Total Fixed Expenses		$406,300
Net Operating Income		$386,100

Solution 2:

Milden Company
Traditional format Income Statement
Sales (35000*$56)		$1,960,000
Less: Cost of goods sold (35000*$26)		$910,000
Gross Profit		$1,050,000
Less: Selling and Administrative Expenses:
Advertising Expense	$183,000
Sales Commission	$117,600
Shipping Expense [$57,000+($4*35000)]	$197,000
Administrative Salaries	$93,000
Insurance Expense	$10,300
Depreciation Expense	$63,000
Total Selling and Administrative Expenses		$663,900
Net Operating Income		$386,100