Question

Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,519 per unit and then sells them to retail customers for an average price of $2,400 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 $942 per month $4,786 per month, plus 48 of sales $57 per piano sold $659 per month $4,948 per month $13,504 per month $686 per month $2,484 per month, plus $37 per piano sold $913 per month During August, Marwick's Planos, Inc., sold and delivered 62 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

Merwick's Pianos, Inc Traditional Income Statement For the Month of August sales Revneue (2400*62) Cost of Goods Sold (1519*62) Gross Margin selling and Administrative Expenses Selling Expenses Advertising Sales Salaries and Commission Delivary of Pianos Utilities 148800 94178 54622 942 10738 3534 659 Depreciation of Sales facilities Total Selling Expenses Administrative Expenses Executive Salaries 4948 20821 13504 Insurance Expenses 686 Clerical 4778 Depreciaiton of Office Equipment Total Administrative Expenses Total Selling and Administrative Expenses Net operating income 913 19881 40702 13920

Merwick's Pianos, Inc Contribution Formate Income Statement For the Month of August Per Piano Total sales Revneue Varaible Expenses 148800 2400 Cost of Goods Sold 1519 94178 Sales Salaries and Commission 5952 96 Delivery of Pianos 3534 57 Clerical 2294 37 Total Variable Expenses Contribution Margin Fixed Expenses Advertisements Sales Salaries and Commission Utilities Depreciaiton of Office Equipment Depreciaiton of sales Facilities 105958 1709 42842 691 942 4786 659 4948 913 13504 Execitive Slaries Insurance 686 Clarical 2484 Total Fixed Cost 28922 Net operating Income 13920