Question

Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,483 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 $942 per month $4,811 per month, plus 6% of sales $59 per piano sold $632 per month $5,064 per month $13,479 per month $684 per month $2,534 per month, plus $45 per piano sold $950 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a traditional format income statement for August. (A "Net operating loss" should be entered as a negative number.) Marwick's Pianos, Inc. Traditional Income Statement For the Month of August Selling and administrative expenses: Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total selling and administrative expenses Required 1 Required 2 >

Answer 1

Solution 1-1:

Traditional Income Statement - Marwick Pianos Inc.
Particulars	Details	Amount
Sales ($2,600*57)		$148,200.00
Less: Cost of Goods Sold (1483*57)		$84,531.00
Gross Profit		$63,669.00
Sellling Expenses:
Advertising	$942.00
Sales Salaries and Commissions (4811 + 6% of 148200)	$13,703.00
Delivery of Pianos to customers (59*57)	$3,363.00
Utilities	$632.00
Depreciation of Sales Facilities	$5,064.00	$23,704.00
Administrative Expenses:
Executive Salaries	$13,479.00
Insurance	$684.00
Clerical (2534 + 45*57)	$5,099.00
Depreciation of office equipment	$950.00	$20,212.00
Net Income		$19,753.00

Solution 1-2:

Contribution margin Income Statement - Marwick Pianos Inc.
Particulars	Per Unit	Total
Sales	$2,600.00	$148,200.00
Variable Cost:
Purchase Cost	$1,483.00	$84,531.00
Sales Commission	$156.00	$8,892.00
Delivery of Pianos to customers	$59.00	$3,363.00
Clerical Expense	$45.00	$2,565.00
Contribution	$857.00	$48,849.00
Fixed Cost:
Advertising		$942.00
Sales Salaries		$4,811.00
Utilities		$632.00
Depreciation of Sales Facilities		$5,064.00
Executive Salaries		$13,479.00
Insurance		$684.00
Clerical		$2,534.00
Depreciation of office equipment		$950.00
Net Income		$19,753.00

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