Question

Marwick's Planos, Inc., purchases planos from a large manufacturer for an average cost of $1,481 per unit and then sells them to retail customers for an average price of $2,900 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 $938 per month $4,829 per month, plus 48 of sales $ 61 per piano sold $ 643 per month $5.015 per month $13,541 per month $ 695 per month $2,531 per month, plus $39 per piano sold $937 per month During August, Marwick's Planos, Inc., sold and delivered 56 planos. 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.

Answer 1

Answer 1.

162400 82936 79464 MARWICK'S PIANOS, INC. Traditional Income Statement For the Month of August Sales ($2,900 * 56) Cost of Goods Sold ($1,481 *56) Gross Profit Selling and Administrative Expenses: Selling Expenses: Advertising Sales Salaries and Commissions ($4,829 + $162,400*4%) Utilities Depreciation of Sales Facilities Delivery of Pianos ($61 * 56) Total Selling Expenses Administrative Expenses: Insurance Executive Salaries Depreciation of Office Equipment Clerical ($2,531 + $39 * 56) Total Administrative Expenses Total Selling and Administrative Expenses Net Operating Income 938 11325 643 5015 3416 21337 695 13541 937 4715 19888 41225 38239

Answer 2.

Per Piano 2900 Sales 39 116 61 MARWICK'S PIANOS, INC. Contribution Format Income Statement For the Month of August Total 162400 Variable Expenses: Clerical 2184 Sales Commissions 6496 Delivery of Pianos 3416 Cost of Goods Sold 82936 Total Variable Expenses 95032 Contribution Margin 67368 Fixed Expenses: Advertising 938 Depreciation of Sales Facilities 5015 Utilities 643 Executive Salaries 13541 Insurance 695 Depreciation of Office Equipment 937 Clerical 2531 Sales Salaries 4829 Total Fixed Expenses 29129 Net Operating Income 38239 1481 1697 1203