Question

Cherokee Inc. is a merchandiser that provided the following information:

		Amount
Number of units sold		11,000
Selling price per unit	$	17
Variable selling expense per unit	$	2
Variable administrative expense per unit	$	2
Total fixed selling expense	$	19,000
Total fixed administrative expense	$	13,000
Beginning merchandise inventory	$	10,000
Ending merchandise inventory	$	26,000
Merchandise purchases	$	90,000

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.

	Cherokee, Inc. Traditional Income Statement Sales $187,000 Cost of goods sold ? Gross margin ? Selling and administrative expenses: ? Selling expenses ? Administrative expenses ? 0 Net operating income ?

	Cherokee, Inc. Contribution Format Income Statement Variable expenses: Sales ? Cost of goods sold ? Selling expenses ? Administrative expenses ? 0 Contribution margin ? Fixed expenses: Selling expenses ? Administrative expenses.    ? 0 Net operating income ?

Answer 1