Question

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,480 per unit and then sells them to retail customers for an average price of $3,100 each. The company's selling and administrative costs for a typical month are presented below: Cost Formula Costs Selling: Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities Administrative: Executive salaries Insurance clerical Depreciation of office equipment $968 per month $4,800 per month, plus 4% of sales $61 per piano sold $644 per month $5,095 per month $13,407 per month $696 per month $2,487 per month, plus $36 per piano sold $947 per month During August, Marwick's Pianos, Inc., sold and delivered 63 pianos. Required: 1. Prepare a traditional format income statement for August. 2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.

Answer 1

$195,300 (63 x $3100] $93,240 [63 x $1480] $102,060 Marwick's Pianos, Inc. Traditional Income Statement For the Month of August Sales Revenue Cost of Goods Sold Gross Profit Selling & Admin. Expenses: Selling Expenses: Advertising $968 Sales Salaries & Commissions $12,612 Delivery of Pianos to Customers $3,843 Utilities $644 Depreciation of Sales Facilities $5,095 Total Selling Expenses $23,162 Administrative Expenses: Executive Salaries $13,407 Insurance $696 Clerical $4,755 Depreciation of Office Equip. $947 Total Administrative Expenses $19,805 Total Selling & Admin. Expenses Net Income [Given] [$4800 + ($195300 x 4%)] [63 x $61] [Given] [Given] [Given] [Given] [$2487 +(63 x $36)] Given] $42,967 ($23162 + $19805] $59,093

$0 Marwick's Pianos, Inc. Contribution Margin Income Statement For the Month of August Total Per Unit Sales Revenue $195,300 $3,100 (Total = 63 x $3100 = $195300] Variable Expenses: Cost of Goods Sold $93,240 $1,480 [Total = 63 x $1480 = $93240] Sales Salaries & Commissions $7,812 $124 [Total = $195300 x 4% = $7812; Per unit = $7812 / 63 = $124] Delivery of Pianos to Customers $3,843 $61 [Total = 63 x $61 = $3843] Clerical $2,268 $36 [Total = 63 x $36 = $2268] Leave this line blank $0 Leave this line blank $0 $0 Total Variable Expenses $107,163 $1,701 Contribution Margin $88,137 $1,399 (Sales Revenue - Total Variable Expenses] Fixed Expenses: Advertising $968 Sales Salaries & Commissions $4,800 Utilities $644 Depreciation of Sales Facilities $5,095 Executive Salaries $13,407 Insurance $696 Clerical $2,487 Depreciation of Office Equip. $947 Total Fixed Expenses $29,044 Net Income $59,093 [Contribution Margin - Total Fixed Expenses]