Question

Marwick's Pianos, Inc. purchases planos from a large manufacturer for an average cost of $1,514 per unit and then sells them to retail customers for an average price of $2,300 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 $4,822 per month, plus 48 of sales $62 per piano sold $658 per month $4,947 per month $13,431 per month $704 per month $2,507 per month, plus $41 per piano sold $926 per month During August, Marwick's Pianos, Inc., sold and delivered 57 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

131100 86298 44802 942 10066 3534 Merwick's Pianos, Inc Traditional Income Statement For the Month of August sales Revneue (57*2300) Cost of Goods Sold (54*1514) Gross Margin selling and Administrative Expenses Selling Expenses Advertising Sales Salaries and Commission (4822+(1311000*4%) Delivary of Pianos (62*57) Utilities Depreciation of Sales facilities Total Selling Expenses Administrative Expenses Executive Salaries Insurance Expenses Clerical Depreciaiton of Office Equipment Total Administrative Expenses Total Selling and Administrative Expenses Net operating income 658 4947 20147 13431 704 4844 926 19905 40052 4750

- 62] 41 Merwick's Pianos, Inc Contribution Formate Income Statement For the Month of August Total Per Piano sales Revneue 131100 23001 Varaible Expenses Cost of Goods Sold 86298 1514 Sales Salaries and Commission 5244 92 Delivery of Pianos 3534 Clerical 2337 Total Variable Expenses 97413 1709 Contribution Margin 33687 591 Fixed Expenses Advertisements 942 Sales Salaries and Commission 4822 Utilities Depreciaiton of Office Equipment 4947 Depreciaiton of sales Facilities 926 Execitive Slaries 13431 Insurance 704 Clarical 2507 Total Fixed Cost 28937 Net operating Income 4750 658