Question

Cherokee Inc. is a merchandiser that provided the following information: 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 Amount 11,000 $ 15 $ 1 $ 1 $21,000 $13,000 $12,000 $23,000 $87,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.

Answer 1

Requirement 1 Cherokee Inc Traditional Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses $ 32,000 Administrative expenses $ 24,000 $ $ $ 165,000 76,000 89,000 $ $ Net operating income 56,000 33,000 $ 165,000 Requirement 2 Cherokee Inc Contribution Format Income Statement Sales Variable expenses Cost of goods sold $ 76,000 Selling expenses $ 11,000 Administrative expenses $ 11,000 $ $ 98,000 67,000 Contribution margin Fixed expenses Selling expenses Administrative expenses $ $ 21,000 13,000 Net operating income $ $ 34,000 33,000 Note : Please comment down for any further clarifications / Issues. Note; As per Chegg Guidelines only 1 question shoule be anaswered at a time, Please post others as separate questions, thank you