Question

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:

Sales	330,000
Beginning merchandise inventory	22,000
purchases	220,000
Ending merchandise inventory	11,000
Fixed administrative expense	?
Fixed administrative expense	13,200
Variable selling expense	16,500
Variable administrative expense	?
Contribution margin	66,000
Net operating Income	19,800

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.

selling price per unit	?
Variable cost per unit	?
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?

traditional income statement or contribution income statement

Answer 1

Please provide rating...

Answer 1)	Prepare a contribution format income statement.
	Contribution margin income statement
		Amt	Amt
	Sales		330000
	Less : Variable expenses
	Cost of goods sold (Note-1)	231,000
	Varaible selling expenses	16500
	Variable administrative expenses (Note-2)	16500	264,000
	Contribution margin		66,000
	Less : Fixed expenses
	Fixed administrative expenses	13,200
	Fixed selling expenses (note-3)	33000	46,200
	Net operating income		19,800
Note-1
	Computation of cost of goods sold
	Beginning merchandise inventory	22,000
Add	purchases	220,000
Less	Ending merchandise inventory	-11,000
	Cost of goods sold	231,000
Note -2.a
	Total variable expenses = Sales - Contribution margin
	Sales	330000
	Contribution margin	-66000
	Variable expenses	264000
Note -2.b
	Computation of Variable administrative expense
	Total variable expenses	264000
Less :	Cost of goods sold	-231000
Less :	Varaible selling expenses	-16500
Total	Variable administrative expenses	16500
Note 3
	Computation of fixed selling expenses
	Total fixed expenses = Contribution - Net income
	=66000-19800	46200
	Fixed selling expenses = Total fixed expenses - Fixed administrative expenses
	=46200-13200	33000
Answer 2)
	Prepare a traditional format income statement.
		Amt	Amt
	Sales		330000
	Less: Cost of goods sold		231,000
	Gross profit margin		99,000
	Expenses
	Varaible selling expenses	16500
	Variable administrative expenses	16500
	Fixed administrative expenses	13,200
	Fixed selling expenses	33000
	Net operating income		19,800
Answer 3)	Calculate the selling price per unit.
	Total sales =	330000
	Unit sold=	1000
	Sales price per unit =330000/1000	330
Answer 4)	Calculate the variable cost per unit.
	Total variable expenses	264,000
	Unit sold=	1000
	Variable cost per unit	264
Answer 5)	Calculate the contribution margin per unit
	selling price per unit	330
	Variable cost per unit	264
	Contribution margin per unit	66
Answer 6)
	Contribution income statement will be more suitable for management to in estimating how net operating income will change in responses to changes in unit sales.