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 |