Question

Milden Company is a merchandiser that plans to sell 23,000 units during the next quarter at a selling price of $51 per unit. The company also gathered the following cost estimates for the next quarter:

Cost	Cost Formula
Cost of good sold	$21 per unit sold
Advertising expense	$171,000 per quarter
Sales commissions	6% of sales
Shipping expense	$42,000 per quarter + $7.00 per unit sold
Administrative salaries	$81,000 per quarter
Insurance expense	$9,100 per quarter
Depreciation expense	$51,000 per quarter

Required:

1. Prepare a contribution format income statement for the next quarter

	Milden Company Contribution Format Income Statement For the Next Quarter Variable expenses: Total variable expenses Contribution margin Fixed expenses: Total fixed expenses

2. Prepare a traditional format income statement for the next quarter

	Milden Company Traditional Format Income Statement For the Next Quarter Selling and administrative expenses: Total selling and administrative expenses

.

Answer 1

1)
Milden Company
Contribution format income statement
Sales revenue (23,000 * $51)		$1,173,000
Less: Variable costs:
Cost of goods sold (23,000 * $21)	($483,000)
Shipping expense (23,000*$7)	($161,000)
Sales commission ($1,173,000*6/100)	($70,380)
Total Variable expenses		($714,380)
Contribution margin		$458,620
Less: Fixed costs:
Advertising expense	($171,000)
Shipping expense	($42,000)
Administrative salaries	($81,000)
Insurance expense	($9,100)
Depreciation expense	($51,000)
Total Fixed Expenses		($354,100)
Net Income		$104,520
2)
Milden Company
Traditional format income statement
Sales revenue (23,000 * $51)		$1,173,000
Less: Cost of goods sold (23,000 * $21)		($483,000)
Gross Profit		$690,000
Less: Selling and administrative expenses:
Shipping expense (23,000*$7)	($161,000)
Sales commission ($1,173,000*6/100)	($70,380)
Advertising expense	($171,000)
Shipping expense	($42,000)
Administrative salaries	($81,000)
Insurance expense	($9,100)
Depreciation expense	($51,000)
Total selling and administrative expenses		($585,480)
Net Income		$104,520