Question

Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,496 per unit and then sells them to retail customers for an average price of $3,100 each. The company's selling and administrative costs for a typical month are presented below: Costs Selling: Cost Formula Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities $944 per month 4,818 per month, plus 4% of sales $62 per piano sold $658 per month $5,082 per month Administrative: Executive salaries $13,436 per month Insurance $692 2,455 per month, plus $44 per piano sold $892 per month per month Clerical Depreciation of office equipment During August, Marwick's Pianos, Inc., sold and delivered 60 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 equ... Requ Prepare a traditional format income statement for August (A "Net operating loss" should be entered as a negative number.) Marwick's Pianos, In Traditional Income Statement or the Month of us Selling and administrative expenses Selling expenses: Total selling expenses Administrative expenses:

Answer 1

Traditional income statement
Particular	Amount	Amount
Sales (60X $3100)		$1,86,000.00
Cost of goods sold (60X $1496)		$89,760.00
Gross Margin		$96,240.00
Less: Selling and administrative expenses
Selling expenses
Advertising	$944.00
Sales salaries and commissions (4818+186000*4%)	$12,258.00
Delivery of pianos ($62*60)	$3,720.00
Utilities	$658.00
Depreciation of sales facilities	$5,082.00
total selling expense		$22,662.00
Administrative expenses:
Executive salaries	$13,436.00
insurance	$692.00
Clerical	$5,095.00
Depreciation of office Equipment	$892.00
Total administrative expense		$20,115.00
Net operating income		$53,463.00

Cotribution format income statement
	total	per unit
Sales (a)	$1,86,000.00	$3,100.00
Less: Variable expenses (b)
Sales salaries and commissions	$7,440.00	$124.00
Delvery of pianos	$3,720.00	$62.00
Clercial	$2,640.00	$44.00
cost of goods sold	$89,760.00	$1,496.00
total variable expense	$1,03,560.00	$1,719.00
Contribution margin (a-b)	$82,440.00	$1,381.00
Fixed expenses ( C)
Advertising	$944.00
Sales salries and commissions	$4,818.00
utilities	$658.00
Depreciation of office equipment	$892.00
Depreciation of sales facilities	$5,082.00
Exceutive salaries	$13,436.00
insurance	$692.00
clercial	$2,455.00
Total fixed expense	$28,977.00
Net Operating Income	$53,463.00