Question

5. value: 3.00 points Exercise 2-6 Traditional and Contribution Format Income Statements [LO2-6] Cherokee Inc. is a merchandiser that provided the following information: Ꮎ Ꮎ Ꮎ Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases 12.000 17.00 1.00 1.50 20.000 16,000 8,000 25,000 87,000 $ $ $ $ Required: 1. Prepare a traditional income statement. CHEROKEE, INC. Traditional Income Statement $ Sales Cost of goods sold Gross margin Selling and administrative expenses: 204,000 70,000 25,000 Selling expenses 224,000 34,000 Administrative expenses 258,000 Ending merchandise inventory Net operating income

Answer 1

Solution

CHEROKEE INC.
Traditional income statement
Sales		$   204,000.00
Cost of goods sold		$      70,000.00
Gross profit		$   134,000.00
Selling and administrative expenses
Selling expenses	$      32,000.00*
Administrative expenses	$      34,000.00
Total selling and administrative cost		$      66,000.00
Net operating income		$      68,000.00

*(12000 x 1) +20000

Requirement 2

.

CHEROKEE INC.
Contribution margin income statement
for the month of June
Sales revenue		$   204,000.00
Less: Variable costs
Cost of goods sold	$      70,000.00
Selling expenses	$      12,000.00
Administrative expenses	$      18,000.00
Total Variable cost		$   100,000.00
Contribution margin		$   104,000.00
Fixed costs
Selling expenses	$      20,000.00
Administrative expenses	$      16,000.00
Total Fixed cost		$      36,000.00
Operating profit		$      68,000.00