In: Accounting
Cherokee Inc. is a merchandiser that provided the following information:
| Amount | ||
| Number of units sold | 13,000 | |
| Selling price per unit | $ | 16 |
| Variable selling expense per unit | $ | 1 |
| Variable administrative expense per unit | $ | 1 |
| Total fixed selling expense | $ | 18,000 |
| Total fixed administrative expense | $ | 13,000 |
| Beginning merchandise inventory | $ | 9,000 |
| Ending merchandise inventory | $ | 25,000 |
| Merchandise purchases | $ | 88,000 |
1. Prepare a traditional income statement.
2. Prepare a contribution format income statement.
1.
Traditional income statement
| Sales | $208,000 | |
| Cost of goods sold | $72,000 | |
| Gross Margin | $136,000 | |
| Selling and administrative expense: | ||
| Selling expense | $31,000 | |
| Administrative expense | $26,000 | |
| Net operating income | $79,000 |
2.
Contribution format income statement
| Sales | $208,000 | |
| Variable expense: | ||
| Cost of goods sold | $72,000 | |
| Variable selling expense | $13,000 | |
| Variable administrative expense | $13,000 | |
| Contribution margin | $110,000 | |
| Fixed expense: | ||
| Total fixed selling expense | $18,000 | |
| Total fixed administrative expense | $13,000 | |
| Net income | $79,000 |