Question

Problem 1-21 (Algo) Traditional and Contribution Format Income Statements [LO1-6] Marwick's Pianos, Inc., purchases planos from a large manufacturer for an average cost of $1,510 per unit and then sells them to re customers for an average price of $2,700 each. The company's selling and administrative costs for a typical month are presented below: Cost Formula costs Selling: Advertising Sal ala and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities Administrative: Executive salaries Insurance clerical Depreciation of office equipment $952 per month $4,791 per month, plus of sales $62 per piano sold $639 per month $4,939 per month $13,434 per month $690 per month $2,452 per month, plus $35 per piano sold $890 per month During August, Marwick's Pianos, Inc., sold and delivered 64 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

172800 96640 76160 Answer to Part 1. MARWICK'S PIANOS, INC. Traditional Income Statement For the Month of August Sales ($2,700 * 64) Cost of Goods Sold ($1,510 * 64) Gross Profit Selling and Administrative Expenses: Selling Expenses: Advertising Sales Salaries and Commissions ($4,791 + $172,800*4%) Utilities Depreciation of Sales Facilities Delivery of Pianos ($62 * 64) Total Selling Expenses Administrative Expenses: Insurance Executive Salaries Depreciation of Office Equipment Clerical ($2,452 + $35 * 64) Total Administrative Expenses Total Selling and Administrative Expenses Net Operating Income 952 11703 639 4939 3968 22201 690 13434 890 4692 19706 41907 34253

Answer to Part 2. MARWICK'S PIANOS, INC. Contribution Format Income Statement For the Month of August Total 172800 Per Piano 2700 2240 6912 3968 96640 109760 63040 35 108 62 1510 1715 985 Sales Variable Expenses: Clerical Sales Commissions Delivery of Pianos Cost of Goods Sold Total Variable Expenses Contribution Margin Fixed Expenses: Advertising Depreciation of Sales Facilities Utilities Executive Salaries Insurance Depreciation of Office Equipment Clerical Sales Salaries Total Fixed Expenses Net Operating Income 952 4939 639 13434 690 890 2452 4791 28787 34253