Question

Marwick's Planos, Inc., purchases pianos from a large manufacturer for an average cost of $1,503 per unit and then sells them to retail customers for an average price of $3,100 each. The company's selling and administrative costs for a typical month are presented below: Cost Formula Costs Selling: Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities Administrative: Executive salaries Insurance Clerical Depreciation of office equipment $957 per month $4,808 per month, plus 5t of sales $57 per piano sold $641 per month $4,917 per month $13,506 per month $715 per month $2,510 per month, plus $39 per piano sold $899 per month During August, Marwick's Pianos, Inc., sold and delivered 64 pianos. Required: 1. Prepare a traditional format Income statement for August. 2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.

Answer 1

Solution

Marwick's Pianos Inc
Traditional Income Statement
For the Month of August
Sales revenue		$   1,98,400.00
Less: Cost of Goods sold		$       96,192.00
Gross Profit		$   1,02,208.00
Selling and Administrative Expenese
Selling Expenses
Advertising	$             957.00
Sales salaries and Commission	$       14,728.00
Delivery Expense	$          3,648.00*
Utilities	$             641.00
Depreciation of sales facility	$          4,917.00
Total Selling Expenses	$       24,891.00
Administrative Expenses
Executive Salaries	$       13,506.00
Insurance	$             715.00
Clerical	$          5,006.00
Depreciation- Office Equipment	$             899.00
Total Administrative expenses	$       20,126.00
Total Selling and Administrative Expense		$       45,017.00
Net income		$       57,191.00

*Delivery expense=64 x $57

Marwick's Pianos Inc
Contribution formal Income statement
For the Month of August
	Total	Per Piano
Sales	$    1,98,400.00	$         3,100.00
variable Expenses
Direct material cost	$       96,192.00	$         1,503.00
Variable Sales salaries and Commission	$          9,920.00	$             155.00
Delivery Expenses	$          3,648.00	$               57.00
Clerical	$          2,496.00	$               39.00
Total Variable Cost	$    1,12,256.00	$         1,754.00
Contribution Margin	$       86,144.00	$         1,346.00
Fixed costs
Advertising	$             957.00
Fixed Sales salaries and Commission	$          4,808.00
Utilities	$             641.00
Depreciation- Sales Facility	$          4,917.00
Executive salaries	$       13,506.00
Insurance	$             715.00
Clerical fixed cost	$          2,510.00
Depreciation- Office equipment	$             899.00
Total Fixed cost	$       28,953.00
Net Income	$       57,191.00