Question

Cherokee Inc. is a merchandiser that provided the following information: Amount 12,000 Մ 16 Մ 2 Մ Մ 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 ՄՌ 19,000 14,000 $ 9,000 $ 24,000 $ 86,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.

Answer 1

Answer-1)-

CHEROKEE INC.
TRADITIONAL FORMAT INCOME STATEMENT
FOR THE MONTH
PARTICULARS		AMOUNT
		$
Sales	12000 units*$16 per unit	192000
Less- Cost of goods sold	($9000+$86000-$24000)	71000
Gross profit		121000
Less - Expenses
Variable selling expense	12000 units*$2 per unit	24000
Fixed selling expense		19000
Variable administrative expense	12000 units*$2 per unit	24000
Fixed administrative expense		14000
Net Income		40000

Explanation- Cost of goods sold = Beginning merchandise inventory+ Merchandise purchases-Ending merchandise inventory

= $9000+$86000-$24000

= $71000

2)-

CHEROKEE INC.
TRADITIONAL FORMAT INCOME STATEMENT
FOR THE MONTH
PARTICULARS		AMOUNT
		$
Sales	12000 units*$16 per unit	192000
Less- Variable costs
Cost of goods sold	($9000+$86000-$24000)	71000
Variable selling expense	12000 units*$2 per unit	24000
Variable administrative expense	12000 units*$2 per unit	24000
Contribution margin		73000
Less-Fixed costs
Fixed selling expense		19000
Fixed administrative expense		14000
Net Income		40000

Explanation- Cost of goods sold = Beginning merchandise inventory+ Merchandise purchases-Ending merchandise inventory

= $9000+$86000-$24000

= $71000