Question

Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,519 per unit and then sells them to retail customers for an average price of $2,600 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 $933 per month $ 4,810 per month, plus 5% of sales $63 per piano sold $670 per month $4,979 per month $13,558 per month $697 per month $2,505 per month, plus $36 per piano sold $ 883 per month During August, Marwick's Pianos, Inc., sold and delivered 57 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		$     148,200.00
Less: Cost of Goods sold		$       86,583.00
Gross Profit		$       61,617.00
Selling and Administrative Expenese
Selling Expenses
Advertising	$             933.00
Sales salaries and Commission	$       12,220.00
Delivery Expense	$          3,591.00
Utilities	$             670.00
Depreciation of sales facility	$          4,979.00
Total Selling Expenses	$       22,393.00
Administrative Expenses
Executive Salaries	$       13,558.00
Insurance	$             697.00
Clerical	$          4,557.00
Depreciation- Office Equipment	$             883.00
Total Administrative expenses	$       19,695.00
Total Selling and Administrative Expenese		$       42,088.00
Net income		$       19,529.00

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Marwick's Pianos Inc
Contribution formal Income statement
For the Month of August
	Total	Per Piano
Sales	$     148,200.00	$         2,600.00
variable Expenses
Direct material cost	$       86,583.00	$         1,519.00
Variable Sales salaries and Commission	$          7,410.00	$             130.00
Delivery Expenses	$          3,591.00	$               63.00
Clerical	$          2,052.00	$               36.00
Total Variable Cost	$       99,636.00	$         1,748.00
Contribution Margin	$       48,564.00	$             852.00
Fixed costs
Advertising	$             933.00
Fixed Sales salaries and Commission	$          4,810.00
Utilities	$             670.00
Depreciation- Sales Facility	$          4,979.00
Executive salaries	$       13,558.00
Insurance	$             697.00
Clerical fixed cost	$          2,505.00
Depreciation- Office equipment	$             883.00
Total Fixed cost	$       29,035.00
Net Income	$       19,529.00