Question

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,500 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $3,400 each. The selling and administrative costs that the company incurs in a typical month are presented below:

Selling:
Advertising	$	954 per month
Sales salaries and commissions	$	4,819 per month, plus 5% of sales
Delivery of pianos to customers	$	63 per piano sold
Utilities	$	636 per month
Depreciation of sales facilities	$	5,032 per month
Administrative:
Executive salaries	$	13,531 per month
Insurance	$	704 per month
Clerical	$	2,516 per month, plus $38 per piano sold
Depreciation of office equipment	$	932 per month

During August, Marwick’s Pianos, Inc., sold and delivered 58 pianos.

Required:

Prepare an income statement for Marwick’s Pianos, Inc., for August, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin. (A "Net operating loss" should be entered as a negative number.)

Answer 1

197200 87000 110200 Merwick's Pianos, Inc Traditional Income Statement For the Month of August sales Revneue (58*3400) Cost of Goods Sold (58*1500) Gross Margin selling and Administrative Expenses Selling Expenses Advertising Sales Salaries and Commission (4816+(197200*5%) Delivary of Pianos (63*58) 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 954 14679 3654 636 5032 24955 13531 704 4720 932 19887 65358

Merwick's Pianos, Inc Contribution Formate Income Statement For the Month of August Total Per Piano sales Revneue 197200 3400 Varaible Expenses Cost of Goods Sold 87000 1500 Sales Salaries and Commission 9860 170 Delivery of Pianos 3654 63 Clerical 2204 38 Total Variable Expenses 102718 1771 Contribution Margin 94482 1629 Fixed Expenses Advertisements 954 Sales Salaries and Commission 4819 Utilities 636 Depreciaiton of Office Equipment 5032 Depreciaiton of sales Facilities 932 Execitive Slaries 13531 Insurance 704 Clarical 2516 Total Fixed Cost 29124 Net operating Income 65358