Question

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales Beginning merchandise inventory Purchases Ending merchandise inventory Fixed selling expense Fixed administrative expense Variable selling expense Variable administrative expense Contribution margin Net operating income $ 300,000 $ 20,000 $ 200,000 $ 7,800 $ ? $ 12,000 $ 15,000 $ 2 $ 60,000 18,800 I 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? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 to 5 Reg 6 Prepare a contribution format income statement. Todrick Company Contribution Format Income Statement Variable expenses:

Answer 1

+ Purchases - Ending merchandise inventory $ 20,000 + $ 200,000 - $1,000 Calculation: Cost of goods sold = Beginning merchandise inventory $ 213,000 Total variable costs Sales contribution margin $ 300,000 $ 240,000 Variable administrative expense $ 60,000 To tal variable costs- (cost of goods sold & variable. selling expense) $240,000 ( $ 213,000 + $ 15,000) $ 240,000 - $ 220,000 $ 12,000 Total fixed costs Contribution margin Met operating income $ 60,000 $ 18,000 $ 48000 Fixed selling expense = Total fixed costs - fixed administrative expense $ 42,000 $ 12,000 $ 30,000 M

Todrick company Traditional Income Statement Sales $ 300,000 $ 213,000 $ 87,060 Cost of goods sold Gross margin selling and administrative expenses Selling expense Administrative expense $ 45,000 $ 24,000 $ 69,000 Net operating income $ 18,000 Calculation: selling expense variable selling expense & fixed selling expense & 15,000 & & 30,000 & 45,000 Administrative expense. Variable administrative expenset fixed administrative expense & 12,000 + $ 12,000 & 24,000 3. 1,000 units sold 4. selling price per unit sales - Onits sold $ 300,000 & 300 Variable cost per unit Total variable cost ₃ units sold $ 240,000 - 1,000 units sold. $ 240 Contribution margin per unit selling price per whit $ 300 $ 240 $60 Variable cost per unit

6. on Contribution format is more useful because it organizes costs based their cost behavior the contribution format income statement enables managers to quickly calculate how variable costs will change in response to changes in unit sales.