Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:
Sales | $ | 465,000 |
Beginning merchandise inventory | $ | 31,000 |
Purchases | $ | 310,000 |
Ending merchandise inventory | $ | 15,500 |
Fixed selling expense | $ | ? |
Fixed administrative expense | $ | 18,600 |
Variable selling expense | $ | 23,250 |
Variable administrative expense | $ | ? |
Contribution margin | $ | 93,000 |
Net operating income | $ | 27,900 |
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?
Answer: |
Cost of Goods Sold = Beginning Inventory + Purchases - Ending
Inventory
Cost of Goods Sold = $31,000 + $310,000 - $15,500
Cost of Goods Sold = $325,500
Contribution Margin = Sales - Variable Expenses
$93,000 = $465,000 - Variable Expenses
Variable Expenses = $372,000
Variable Expenses = Cost of Goods Sold + Variable Selling
Expense + Variable Administrative Expenses
$372,000 = $325,500 + $23,250 + Variable Administrative
Expenses
Variable Administrative Expenses = $23,250
Net Operating Income = Contribution Margin - Fixed
Expenses
$27,900 = $93,000 - Fixed Expenses
Fixed Expenses = $65,100
Fixed Expenses = Fixed Selling Expenses + Fixed Administrative
Expenses
$65,100 = Fixed Selling Expense + $18,600
Fixed Selling Expenses = $46,500
Answer to Part 3.
Selling price per Unit = Total Sales / Units Sold
Selling price per Unit = 465,000 / 1,000
Selling price per Unit = $465
Answer to Part 4.
Variable Cost per Unit = Total Variable Expense / Units
Sold
Variable Expenses = Cost of Goods Sold + Variable Selling Expense +
Variable Administrative Expenses
Variable Expense = $325,500 + $23,250 + $23,250
Variable Expenses = $372,000
Variable Cost per Unit = 372,000 / 1,000
Variable Cost per Unit = $372
Answer to Part 5.
Contribution Margin per Unit = Contribution Margin / Units
Sold
Contribution Margin per Unit = 93,000 / 1,000
Contribution Margin per Unit = $93
Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales...
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