Question

2. Prepare a contribution format income statement.

Cherokee Inc. is a merchandiser that provided the following information:

		Amount
Number of units sold		11,000
Selling price per unit	$	18
Variable selling expense per unit	$	2
Variable administrative expense per unit	$	1
Total fixed selling expense	$	18,000
Total fixed administrative expense	$	14,000
Beginning merchandise inventory	$	11,000
Ending merchandise inventory	$	25,000
Merchandise purchases	$	88,000

Answer 1

C., Inc. Contribution Format Income Statement: Workings 198,000 74,000 Sales (11,000x18) - Variable expenses: Cost of goods sold (11,000+88,000-$25,000) Variable selling expenses (11,000x2) Variable administrative expenses (11,000x2) 22,000 11,000 Contribution margin 91,000 (198.000 - 74.000 - 22.000 - 11,000) - Fixed expenses: Fixed selling expenses Fixed administrative expenses Net operating income 18,000 14.000 59,000 |(91,000 - 21,000 - 14,000)