Question

& Marwick's Planos, Inc., purchases planos 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 $2,800 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 planos to customers Utilities Depreciation of sales facilities Administrativet Executive salaries Insurance clerical Depreciation of office equipment $936 per month $4,814 per month, plus 48 of sal $60 per piano sold $638 per month $4.986 per month $13,579 per month $715 per month $2,504 per month, plus $39 per piano sold $911 per month During August, Marwick's Planos, Inc., sold and delivered 55 planos. 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. Complete this question by entering your answers in the tabs below. < Prey Next

Answer 1

(1) Prepare a traditional format income statement for August:-

Marwick’s Pianos, Inc.
Traditional Income Statement
For the Month of August
Sales		$154000
Cost of Goods Sold		$83545
Gross Margin		$70455
Selling and administrative expenses:
Selling expenses:
Advertising	$936
Sales Salaries and commissions	$10974
Delivery of pianos	$3300
Utilities	$638
Depreciation of Sales facilities	$4986
Total selling expenses	$20834
Administrative expenses:
Executive salaries	$13579
Insurance	$715
Clerical	$4649
Depreciation of office equipment	$911
Total administrative expenses	$19854
Total Selling and administrative expenses		$40688
Net Operating income		$29767

Explanation

Sales: (55 pianos × $2800 per piano) = $154000

Cost of goods sold: (55 pianos × $1519 per piano) = $83545

Sales salaries and commissions: [$4814 + (4% × $154000)] = $10974

Delivery of pianos: (55 pianos × $60 per piano) = $3300

Clerical: [$2504 + (55 pianos × $39 per piano)] = $4649

(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:-

Marwick’s Pianos, Inc.
Contribution Format Income Statement
For the Month of August
	Total	Per Piano
Sales	$154000	$2800
Variable expenses:
Sales Salaries and commissions	$6160	$112
Delivery of pianos	$3300	$60
Clerical	$2145	$39
Cost of Goods sold	$83545	$1519
Total Variable expenses	$95150	$1730
Contribution Margin	$58850	$1070
Fixed expenses:
Advertising	$936
Sales Salaries and commissions	$4814
Utilities	$638
Depreciation of office equipment	$911
Depreciation of sales facilities	$4986
Executive salaries	$13579
Insurance	$715
Clerical	$2504
Total fixed expenses	$29083
Net Operating income	$29767