Question

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 11,000 17 1 3 $ 21,000 $ 15,000 $ 8,000 $ 25,000 $ 86,000 points Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a traditional income statement. $ Cherokee, Inc. Traditional Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses $ 32,000 187,000 69,000 118,000 Administrative expenses 48,000 80,000 38,000 Net operating income $

Answer 1

1. Cherokee Inc

Traditional Income Statement

Particularas	Amount	Amount
Sales		$187,000
Cost of Goods Sold		$69,000
Gross Margin		$118,000
Selling and Administrative Expenses;
Selling Expenses	$32,000
Administrative Expenses	$48,000	$80,000
Net Operating Income		$38,000

Explanation;  

1.Sales : ($17 Per Unit × 11,000 Units )=$187,000

2. Cost of Goods Sold : ($8,000 + $86,000 - $25,000) = $69,000

3. Selling Expenses= ($1 × 11,000 Units ) + 21,000 = $ 32,000

4. Administrative Expenses :( ($3 Per Unit × 11,000 Units ) + $15,000) = $48,000.

2. Cherokee Inc.

Contribution Format Income Statement

Particulars	Amount	Amount
Sales		$187,000
Variable Expenses;
Cost of Goods Sold	$69,000
Selling Expenses	$11,000
Administrative Expenses	$33,000	$113,000
Contribution Margin		$74,000
Fixed Expenses;
Selling Expenses	$21,000
Administrative Expenses	$15,000	$36,000
Net Operating Income		$38,000

Explanation;

1. Cost of Goods Sold = ($8,000 + $86,000 - $25,000) = $69,000

2. Selling Expenses=($1 Per Unit × 11,000 Unit ) =$ 11,000

3. Administrative Expenses = ($3 Per Unit × 11,000 Unit ) = $33,000