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 $ 240,000 $ 16,000 $ 160,000 8,000 ? $ 9,600 $ 12,000 ? $ 48,000 $ 14,400 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 you answers in the tabs below.

Answer 1

240000 Requirement: 1 Todrick Company Contribution Format Income Statement Sales Variable expenses: Cost of goods sold 168000 Selling expense 12000 Administrative expense 12000 192000 48000 Total variable expenses Contribution margin Fixed expenses: Selling expense Administrative expense 24000 96001 Total fixed expenses Net Operating income 33600 14400

Requirement: 2 Todrick Company Traditional Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expense 240000 168000 72000 36000 21600 Total selling and administrative expenses Net operating income 57600 14400 Requirement: 3 Selling price per unit = Sales / Units sold Sales Units sold Selling price per unit 240000 1000 2401 Requirement: 4 Variable cost per unit = Total variable cost / Units Total variable cost 192000 units 1000 Variable cost per unit 192

Requirement: 5 Contribution margin per unit = Contribution margin / units sold Contribution margin 48000 Units sold 1000 Contribution margin per unit 48 Requirement: 6 Contribution Format income statement is more useful to managers in estimating the net operating income and deterimining changes in profit according to changes in sales volume