Question

Amount 11,000 17 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 $ 21,000 $ 15,000 $ 10,000 $ 22,000 $ 86,000 Required: 1. Prepare a traditional income statement 2. Prepare a contribution format income statement. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a traditional income statement. Cherokee, Inc. Traditional Income Statement

Answer 1

1.

Cherokee Inc.
Traditional Income Statement
Sales revenue ( 11,000 x 17)		187,000
Cost of goods sold:
Beginning merchandise inventory	10,000
Merchandise purchases	86,000
Cost of goods available for sale	96,000
Ending merchandise inventory	-22,000
Cost of goods sold		-74,000
Gross Profit		$113,000
Operating expenses:
Variable selling expenses ( 11,000 x 2)	22,000
Fixed selling expenses	21,000
Variable administrative expenses ( 11,000 x 2)	22,000
Fixed administrative expenses	15,000
Total Operating Expenses		-80,000
Operating Income		$33,000

2.

Cherokee Inc.
Contribution Format Income Statement
Sales revenue ( 11,000 x 17)			187,000
Variable expenses:
Cost of goods sold
Beginning merchandise inventory	10,000
Merchandise purchases	86,000
Cost of goods available for sale	96,000
Ending merchandise inventory	-22,000
Cost of goods sold		74,000
Variable selling expenses ( 11,000 x 2)		22,000
Variable administrative expenses ( 11,000 x 2)		22,000
Total Variable expenses			-118,000
Contribution Margin			$69,000
Fixed Expenses:
Fixed selling expenses	21,000
Fixed administrative expenses	15,000
Total Fixed Expenses			-36,000
Operating Income			$33,000

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