Question

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,484 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $2,600 each. The selling and administrative costs that the company incurs in a typical month are presented below:

Marwick's Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,484 each from the manufacturer. Marwick's Pianos, Inc., sells the pianos to its customers at an average price of $2,600 each. The selling and administrative costs that the company incurs in a typical month are presented below Costs Cost Formula Advertising Sales salares and c Delivery of pianos to customers Utilities Depreciation of salles facilities $4,826 per month, plus 4% of sales $61 per piano sold 3 per month $4,945 per month Administrative Executive salaries $13,598 per month 5 per month $2,528 per month, plus S43 per piano sold Clerical Depreciation of office equipment During August, Marwick's Pianos, Inc., sold and delivered 56 pianos Required: 1. Prepare an income statement for Marwick's Pianos, Inc., for August. Use the traditional format, with costs organized by function. (A "Net operating loss" should be entered as a negative number.) Marwick's Pianos, Inc Traditional Income Śtatement For the Month of August Sales Selling and administrative expenses: Selling expenses:

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Answer 1

	Marwick's Pianos
	Traditional format Income statement
	For the month of August
	Sales (56 units X $2600)		$   1,45,600
Less:	Cost of goods sold (56 units X $1484)		$       83,104
	Gross Profit		$       62,496
Less:	Operating Expenses:
	Selling expenses:
	Advertising	$           964
	Sales Salaries and commission ($145600 X 4%) + $4826	$     10,650
	Delivery of Pianos to customers(56 units X $61)	$       3,416
	Utilities	$           663
	Depreciation of sales facilities	$       4,945
	Administrative expenses:
	Executive salaries	$     13,598
	Insurance	$           685
	Clerical (56 units X $43)+$2528	$       4,936
	Depreciation of office equipment	$           905
	Total operating expense		$       40,762
	Net Income		$       21,734
	Marwick's Pianos
	Contribution format Income statement
	For the month of August
		Per unit	Total
	Sales (56 units X $2600)	$       2,600		$ 1,45,600
Less:	Variable cost
	Cost of goods sold (56 units X $1484)	$       1,484	$       83,104
	Sales commission ($145600 X 4%)	$           104	$         5,824
	Delivery of Pianos to customers(56 units X $61)	$             61	$         3,416
	Clerical (56 units X $43)	$             43	$         2,408
	Total Variable cost	$       1,692		$     94,752
	Contribution margin	$           908		$     50,848
Less:	Fixed cost
	Advertising		$             964
	Sales Salaries		$         4,826
	Utilities		$             663
	Depreciation of sales facilities		$         4,945
	Executive salaries		$       13,598
	Insurance		$             685
	Clerical		$         2,528
	Depreciation of office equipment		$             905
	Total Fixed cost			$     29,114
	Net Income			$     21,734