Question

Milden Company is a merchandiser that plans to sell 27,000 units during the next quarter at a selling price of $53 per unit. The company also gathered the following cost estimates for the next quarter: Cost Cost of good sold Advertising expense Sales commissions Shipping expense Administrative salaries Insurance expense Depreciation expense Cost Formula $23 per unit sold $173,000 per quarter 6% of sales $68,eee per quarter + $5.00 per unit sold $83,000 per quarter $9,300 per quarter $53,000 per quarter Required: 1. Prepare a contribution format income statement for the next quarter. 2. Prepare a traditional format income statement for the next quarter. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a contribution format income statement for the next quarter. Milden Company Contribution Format Income Statement For the Next Quarter Variable expenses

Answer 1

Contribution margin income statement

Sales (27,000 * $53)		$1,431,000
Variable expenses :
...Cost of goods sold (27,000 * $23)	$621,000
...Sales commissions ($1,431,000 * 6%)	$85,860
...Shipping expense (27,000 * $5.00)	$135,000
Total Variable expenses		$841,860
Contribution margin ($1,431,000 - $841,860)		$589,140
Fixed expenses :
...Advertising expense	$173,000
...Shipping expense	$68,000
...Administrative salaries	$83,000
...Insurance expense	$9,300
...Depreciation expense	$53,000
Total fixed expenses		$386,300
Net operating income ($589,140 - 386,300)		$202,840

Traditional format income statement

Sales		$1,431,000
Cost of goods sold		$621,000
Gross Margin		$810,000
Selling and administrative expenses :
...Advertising expense	$173,000
...Sales commission	$85,860
...Shipping expense ($135,000 + $68,000)	$203,000
...Administrative salaries	$83,000
...Insurance expense	$9,300
...Depreciation expense	$53,000
Total selling and administrative expenses		$607,160
Net Operating income ($810,000 - $607,160)		$202,840