Question

hw ch2.3

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,481 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $3,300 each. The selling and administrative costs that the company incurs in a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$	948 per month
Sales salaries and commissions	$	4,827 per month, plus 4% of sales
Delivery of pianos to customers	$	62 per piano sold
Utilities	$	650 per month
Depreciation of sales facilities	$	5,096 per month
Administrative:
Executive salaries	$	13,500 per month
Insurance	$	701 per month
Clerical	$	2,483 per month, plus $39 per piano sold
Depreciation of office equipment	$	882 per month

During August, Marwick’s Pianos, Inc., sold and delivered 57 pianos.

Required:

1. Prepare an income statement for Marwick’s Pianos, Inc., for August. Use the traditional format, with costs organized by function. (A "Net operating loss" should be entered as a negative number.)

Answer 1