Question

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Problem 1-25 Traditional and Contribution Format Income Statements (L01-6) Milden Company is a merchandiser that plans to sell 37,000 units during the next quarter at a selling price of $55 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 $27 per unit sold $184,000 per quarter 5% of sales $24,000 per quarter + $5.00 per unit sold $94, eee per quarter $10,400 per quarter $64,000 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a contribution format income statement for the next quarter.

Answer 1

Solution

Milden Company
Contribution margin Income statement
For the Next Quarter
Sales		$ 2,035,000
Less: Variable costs
Variable Cost of goods sold	$ 999,000
Variable selling expenses	$ 185,000
Variable selling commission	$ 101,750
Total Variable cost		$ 1,285,750
Contribution margin		$ 749,250
Less: Fixed Costs
Advertising expense	$ 184,000
Shipping expenses	$ 24,000
Administrative salaries	$ 94,000
Insurance expense	$ 10,400
Depreciation expense	$ 64,000
Total Fixed Costs		$ 376,400
Net Income		$ 372,850

.

Milden Company
Traditional Format Income Statement
For the Next Quarter
Sales		$ 2,035,000
Cost of goods sold		$ 999,000
Gross margin		$ 1,036,000
Selling and administrative expenses:
Advertising expense	$ 184,000
Sales commission	$ 101,750
Shipping expense	$ 209,000
Administrative salaries	$ 94,000
Insurance expense	$ 10,400
Depreciation expense	$ 64,000
Total selling and administrative expenses		$ 663,150
Net operating income		$ 372,850