Question

Check my work Problem 1-19 Traditional and Contribution Format Income Statements (LO1-6] Todrick Company is a merchandiser that reported the following information based on 1,000 units sold $330,000 $ 22,000 $220,000 $ 11,000 Sales Beginning merchandise inventory Purchases Ending merchandise inventory Fixed selling expense Fixed administrative expense Variable selling expense Variable administrative expense Contribution margin Net operating income $ 13,200 $ 16,500 %24 $ 66,000 $ 19,800 Required: 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. 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?

Answer 1

1	Todrick Company
	Contribution Format Income Statement
	Sales		$330,000
	Variable Expenses:
	Cost of goods sold	$231,000
	Selling expense	$16,500
	Administrative expense	$16,500
	Total variable expenses		$264,000
	Contribution margin		$66,000
	Fixed Expenses:
	Selling expense	$33,000
	Administrative expense	$13,200
	Total fixed expenses		$46,200
	Net Operating Income		$19,800
2
	Todrick Company
	Traditional Income Statement
	Sales		$330,000
	Cost of goods sold		$231,000
	Gross Margin		$99,000
	Selling and administrative expenses:
	Selling expense	$49,500
	Administrative expense	$29,700
			$79,200
	Net Operating Income		$19,800
3
	Selling price per unit = $330
	($330,000/1,000 units)
4
	Variable cost per unit = $264
	Variable Expenses:
	Cost of goods sold	$231,000
	Selling expense	$16,500
	Administrative expense	$16,500
	Total variable expenses		$264,000
	Divided by no of units		1,000
	variable cost per unit		$264
5	The contribution margin per unit is $330 - $264 = $66