Milden Company is a merchandiser that plans to sell 23,000 units during the next quarter at a selling price of $51 per unit. The company also gathered the following cost estimates for the next quarter:
Cost | Cost Formula | ||
Cost of good sold | $21 per unit sold | ||
Advertising expense | $171,000 per quarter | ||
Sales commissions | 6% of sales | ||
Shipping expense | $42,000 per quarter + $7.00 per unit sold | ||
Administrative salaries | $81,000 per quarter | ||
Insurance expense | $9,100 per quarter | ||
Depreciation expense | $51,000 per quarter | ||
Required:
1. Prepare a contribution format income statement for the next quarter
|
2. Prepare a traditional format income statement for the next quarter
|
.
1) | ||
Milden Company | ||
Contribution format income statement | ||
Sales revenue (23,000 * $51) | $1,173,000 | |
Less: Variable costs: | ||
Cost of goods sold (23,000 * $21) | ($483,000) | |
Shipping expense (23,000*$7) | ($161,000) | |
Sales commission ($1,173,000*6/100) | ($70,380) | |
Total Variable expenses | ($714,380) | |
Contribution margin | $458,620 | |
Less: Fixed costs: | ||
Advertising expense | ($171,000) | |
Shipping expense | ($42,000) | |
Administrative salaries | ($81,000) | |
Insurance expense | ($9,100) | |
Depreciation expense | ($51,000) | |
Total Fixed Expenses | ($354,100) | |
Net Income | $104,520 | |
2) | ||
Milden Company | ||
Traditional format income statement | ||
Sales revenue (23,000 * $51) | $1,173,000 | |
Less: Cost of goods sold (23,000 * $21) | ($483,000) | |
Gross Profit | $690,000 | |
Less: Selling and administrative expenses: | ||
Shipping expense (23,000*$7) | ($161,000) | |
Sales commission ($1,173,000*6/100) | ($70,380) | |
Advertising expense | ($171,000) | |
Shipping expense | ($42,000) | |
Administrative salaries | ($81,000) | |
Insurance expense | ($9,100) | |
Depreciation expense | ($51,000) | |
Total selling and administrative expenses | ($585,480) | |
Net Income | $104,520 |
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