Question

Milden Company is a merchandiser that plans to sell 41,000 units during the next quarter at a selling price of $66 per unit. The company also gathered the following cost estimates for the next quarter:

Cost	Cost Formula
Cost of good sold	$33 per unit sold
Advertising expense	$189,000 per quarter
Sales commissions	6% of sales
Shipping expense	$39,000 per quarter + $4.00 per unit sold
Administrative salaries	$99,000 per quarter
Insurance expense	$10,900 per quarter
Depreciation expense	$69,000 per quarter

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

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

Answer 1

Milden Company
Traditional Format Income Statement
For the Next Quarter
Sales		$ 27,06,000.00
Cost of goods sold		$ 13,53,000.00
Gross margin		$ 13,53,000.00
Selling and administrative expenses:
Advertising expense	$1,89,000.00
Sales commission	$1,62,360.00
Shipping expense	$2,03,000.00
Administrative salaries	$   99,000.00
Insurance expense	$   10,900.00
Depreciation expense	$   69,000.00
Total selling and administrative expenses		$   7,33,260.00
Net operating income		$     6,19,740.00

Milden Company
Contribution margin Income statement
For the Next Quarter
Sales		$ 27,06,000.00
Less: Variable costs
Variable Cost of goods sold	$ 13,53,000.00
Variable selling expenses	$   1,64,000.00
Variable selling commission	$   1,62,360.00
Total Variable cost		$ 16,79,360.00
Contribution margin		$ 10,26,640.00
Less: Fixed Costs
Advertising expense	$   1,89,000.00
Shipping expenses	$       39,000.00
Administrative salaries	$       99,000.00
Insurance expense	$       10,900.00
Depreciation expense	$       69,000.00
Total Fixed Costs		$   4,06,900.00
Net Income		$   6,19,740.00