Cherokee Inc. is a merchandiser that provided the following information:
Amount | ||
Number of units sold | 10,000 | |
Selling price per unit | $ | 17 |
Variable selling expense per unit | $ | 2 |
Variable administrative expense per unit | $ | 2 |
Total fixed selling expense | $ | 22,000 |
Total fixed administrative expense | $ | 15,000 |
Beginning merchandise inventory | $ | 11,000 |
Ending merchandise inventory | $ | 25,000 |
Merchandise purchases | $ | 89,000 |
1. Prepare a traditional income statement.
2. Prepare a contribution format income statement.
Solution
CHEROKEE INC. | ||
Traditional income statement | ||
Sales | $ 1,70,000.00 | |
Cost of goods sold | $ 75,000.00 | |
Gross profit | $ 95,000.00 | |
Selling and administrative expenses | ||
Selling expenses | $ 42,000.00* | |
Administrative expenses | $ 35,000.00** | |
Total selling and administrative cost | $ 77,000.00 | |
Net operating income | $ 18,000.00 |
*(10000 x 2) +22000
**(10000 x 2)+15000
CHEROKEE INC. | ||
Contribution margin income statement | ||
for the month of June | ||
Sales revenue | $ 1,70,000.00 | |
Less: Variable costs | ||
Cost of goods sold | $ 75,000.00 | |
Selling expenses | $ 20,000.00 | |
Administrative expenses | $ 20,000.00 | |
Total Variable cost | $ 1,15,000.00 | |
Contribution margin | $ 55,000.00 | |
Fixed costs | ||
Selling expenses | $ 22,000.00 | |
Administrative expenses | $ 15,000.00 | |
Total Fixed cost | $ 37,000.00 | |
Operating profit | $ 18,000.00 |
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Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold 10,000...
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