Question

In: Accounting

Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold 13,000...

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

Amount
Number of units sold 13,000
Selling price per unit $ 15
Variable selling expense per unit $ 1
Variable administrative expense per unit $ 1
Total fixed selling expense $ 18,000
Total fixed administrative expense $ 16,000
Beginning merchandise inventory $ 9,000
Ending merchandise inventory $ 22,000
Merchandise purchases $ 85,000

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.

Solutions

Expert Solution

Traditional Income Statement: Merchandise Consumed:
Sales Revenue (15*13000)        1,95,000 Beginning Inventory           9,000
Less: Expenses Add: Merchandise Purchase        85,000
Merchandise Consumed        72,000.0        94,000
Variable Selling Expense(1*13000)        13,000.0 Less: Ending Merchandise        22,000
Variable Admin Expense(1*13000)        13,000.0 Merchandise Consumed        72,000
Fixed Selling Expense        18,000.0
Fixed Admin Expense        16,000.0
Net Operating Income        63,000.0
Contribution Format Income Statement:
Sales Revenue (15*13000)        1,95,000
Less: Cost of Goods Sold
Merchandise Consumed        72,000.0
Gross Contribution     1,23,000.0
Variable Selling Expense(1*13000)        13,000.0
Variable Admin Expense(1*13000)        13,000.0
Net Contribution        97,000.0
Less: Period Expense
Fixed Selling Expense        18,000.0
Fixed Admin Expense        16,000.0
Net Operating Income        63,000.0

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