Question

Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,520 per unit and then sells them to retail customers for an average price of $3,400 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 $968 per month $4,793 per month, plus 5% of sales $62 per piano sold $646 per month $5,041 per month $13,551 per month $714 per month $2,511 per month, plus $38 per piano sold $879 per month During August, Marwick's Pianos, Inc., sold and delivered 61 pianos.

Answer 1

1)

MARWICK'S PIANOS INC TRADITIONAL FORMAT INCOME STATEMENT FOR THE MONTH ENDED AUGUST
Sales revenue (61*3400)		207400
less:Cost of goods sold (61*1520)		92720
Gross margin		114680
Less:selling and administrative expense
Selling expense
Advertising	968
sales salaries and commissions [4793+ (207400*5%)]	15163
Delivery of pianos to customers (62*61)`	3782
Utilities	646
Depreciation of sales facilities	5041
Total selling expense	25600
Administrative expense
Executive salaries	13551
Insurance	714
Clerical [2511+ (38*61)]	4829
Depreciation of office equipment	879
Total administrative expense	19973
Total selling and administrative expense		45573
Net operating income		69107

b)

MARWICK'S PIANOS INC CONTRIBUTION MARGIN INCOME STATEMENT FOR THE MONTH ENDED AUGUST
Sales revenue (61*3400)	3400	207400
lesS:variable expense
Cost of sales	1520	92720
sales salaries and commissions	3400*5%=170	10370
Delivery of pianos to customers	62	3782
Clerical	38	2318
Total variable cost	1790	109190
Total contribution margin	1610	98210
Fixed cost
Advertising		968
sales salaries and commissions		4793
Utilities		646
Depreciation of sales facilities		5041
Executive salaries		13551
Insurance		714
Clerical		2511
Depreciation of office equipment		879
Total fixed cost		29103
Net operating income		69107