Question

Check my work Problem 1-21 Traditional and Contribution Format Income Statements [LO1-6] points Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,507 per unit and then sells them to retail customers for an average price of $2,200 each. The company's selling and administrative costs for a typical month are presented below: Cost Formula eBook 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 $951 per month $4,829 per month, plus 6% of sales $59 per piano sold $637 per month $5,075 per month Print $13,459 per month $714 per month $2,509 per month, plus $37 per piano sold $948 per month References During August, Marwick's Pianos, Inc., sold and delivered 62 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 1:

Traditional Income Statement - Marwick Pianos Inc.
Particulars	Details	Amount
Sales ($2,200*62)		$136,400.00
Less: Cost of Goods Sold (1507*62)		$93,434.00
Gross Profit		$42,966.00
Sellling Expenses:
Advertising	$951.00
Sales Salaries and Commissions (4829 + 6% of 136400)	$13,013.00
Delivery of Pianos to customers (59*62)	$3,658.00
Utilities	$637.00
Depreciation of Sales Facilities	$5,075.00	$23,334.00
Administrative Expenses:
Executive Salaries	$13,459.00
Insurance	$714.00
Clerical (2509 + 37*62)	$4,803.00
Depreciation of office equipment	$948.00	$19,924.00
Net Income		-$292.00

Solution 2:

Contribution margin Income Statement - Marwick Pianos Inc.
Particulars	Per Unit	Total
Sales	$2,200.00	$136,400.00
Variable Cost:
Purchase Cost	$1,507.00	$93,434.00
Sales Commission	$132.00	$8,184.00
Delivery of Pianos to customers	$59.00	$3,658.00
Clerical Expense	$37.00	$2,294.00
Contribution	$465.00	$28,830.00
Fixed Cost:
Advertising		$951.00
Sales Salaries		$4,829.00
Utilities		$637.00
Depreciation of Sales Facilities		$5,075.00
Executive Salaries		$13,459.00
Insurance		$714.00
Clerical		$2,509.00
Depreciation of office equipment		$948.00
Net Income		-$292.00