Question

I'm not sure where to begin. What steps do I take to find the variable administrative expense and fixed selling expense?
Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: $ 405,000 Sales Beginning merchandise inventory Purchases 27,000 270,000 13,500 Ending merchandise inventory Fixed selling expense Fixed administrative expense Variable selling expense Variable administrative expense Contribution margin Net operating income 16,200 20,250 81,000 24,300 Required: 1. Prepare a contribution format income statement. 2. Prepare a traditional format income statement. 3. Calculate the selling price per unit. 4. Calculate the variable cost per unit. 5. Calculate the contribution margin per unit. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales? Complete this question by entering your answers in the tabs below.

Answer 1

405,000 Part 1: Income Statement Contribution format income statement sales Variable expense: cost of goods sold selling expense Administrative expense a 283,500 20,250 20,250 d 324,000 81,000 Contribution margin Fixed expense: selling expense Administrative expense 40,500 16,200 56,700b Net operating income 24,300 Part 2: Traditional Income statement 405,000 283,500 121,500 sales cost of goods sold Gross margin Selling and administrative expenses selling expense Administrative expense 60,750f 36,450 g 97,200 24,300 Net operating income

Part 3: selling price per unit =sales/units (405000/1000) Part 4: Variable cost per unit = Total variable cost/units (324000/1000) Part 5: contribution margin per unit=Total contribution margin/units (81000/1000) Part 6: contribution format 283,500 56,700 Working: | COGS=Beginventory+Purchase-Ending inventory 27000+270000-13500 Total FC=Total CM-NOI 81000-24300 Total VC=Sales-Total CM 405000-81000 Variable Adm expense Total VC-COGS-Variable selling exp c 324,000 d 20,250 40,500 324000-283500-20250 Fixed selling exp=Total FC-Fixed Adm exp 56700-16200 Total selling expVariable selling exp+Fixed selling exp 20250+40500 Total adm exp=variable adm exp+fixed adm exp 20250+16200 60,750 g 36.450