Question

1 Cherokee Inc. is a merchandiser that provided the following information: Amount 20 points 14,000 18 Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense eBook 3 per unit Total fixed selling expense $19,000 Total fixed administrative Hint $13,000 expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $11,000 $24,000 $89,000 Print Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement. References Complete this question by entering your answers in the tabs below. Required Required 2 Prepare a traditional income statement. Cherokee, Inc. Traditional Income Statement Selling and administrative expenses: < Required 1 Required 2 >

Answer 1

1.

Cherokee, Inc
Traditional Income Statement
Sales (14,000*$18)		$ 252,000
Less: cost of goods sold ($11,000+$89,000-$24,000)		$    76,000
Gross profit		$ 176,000
Less: Selling and administrative expenses
Selling expenses (14,000*1)+$19,000)	$ 33,000
Administrative expenses (14,000*$3)+$13,000)	$ 55,000
Total selling and administrative expenses		$    88,000
Net income		$    88,000

2.

Cherokee, Inc
Contribution format income statement
Sales (14,000*$18)		$ 252,000
Less: Variable expenses
Less: cost of goods sold ($11,000+$89,000-$24,000)	$ 76,000
Variable Selling expenses ($1*14,000)	$ 14,000
Variable Administrative expenses ($3*14,000)	$ 42,000
Total variable expenses		$ 132,000
Contribution margin		$ 120,000
Less: Fixed expenses
Fixed selling expenses	$ 19,000
Fixed administrative expenses	$ 13,000
Total fixed expenses		$    32,000
Net income		$    88,000

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