Question

Milden Company is a merchandiser that plans to sell 35,000 units during the next quarter at a selling price of $56 per unit. The company also gathered the following cost estimates for the next quarter: 20 points Cost Cost of good sold Advertising expense Sales commissions Shipping expense Administrative salaries Insurance expense Depreciation expense Cost Formula $26 per unit sold $183,000 per quarter 6% of sales $57,000 per quarter + $4.00 per unit sold $93,000 per quarter $10,300 per quarter $63,000 per quarter eBook Ask Required: 1. Prepare a contribution format income statement for the next quarter. 2. Prepare a traditional format income statement for the next quarter. Print

How to calculate the net operating income for both and shipping expense?

Answer 1

Milden Company Contribution Margin Income Statement Sales $1,960,000 (35,000 units x $56] Variable Expenses: Cost of Goods Sold $910,000 [35,000 units x $26] Variable Sales Commissions $117,600 ($1960000 x 6% --> 6% of sales] Variable Shipping Expenses $140,000 [35,000 units x $4] Total Variable Expenses $1,167,600 Contribution Margin $792,400 ($1960000 - $1167600 --> Sales - Total Variable Expenses] Fixed Expenses: Advertising Expense $183,000 Fixed Shipping Expense $57,000 Administrative Salaries $93,000 Insurance Expense $10,300 Depreciation Expense $63,000 Total Fixed Expenses $406,300 Net Operating Income $386,100 [$792400 - $406300 --> Contribution Margin - Total Fixed Expenses]

Milden Company Traditional Format Income Statement Sales $1,960,000 (35,000 units x $56] Cost of Goods Sold $910,000 [35,000 units x $26] Gross Profit $1,050,000 ($1960000 - $910000 --> Sales - Cost of Goods Sold) Expenses: Sales Commissions $117,600 ($1960000 x 6% --> 6% of sales] Shipping Expenses $197,000 [35,000 units x $4] + $57000 Advertising Expense $183,000 Administrative Salaries $93,000 Insurance Expense $10,300 Depreciation Expense $63,000 Total Expenses $663,900 Net Operating Income $386,100 ($1050000 - $663900 --> Gross Profit - Total Expenses]