Question

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,511 per unit and then sells them to retail customers for an average price of $2,300 each. The company’s selling and administrative costs for a typical month are presented below: Costs Cost Formula Selling: Advertising $ 937 per month Sales salaries and commissions $ 4,787 per month, plus 4% of sales Delivery of pianos to customers $ 62 per piano sold Utilities $ 666 per month Depreciation of sales facilities $ 5,098 per month Administrative: Executive salaries $ 13,421 per month Insurance $ 703 per month Clerical $ 2,466 per month, plus $36 per piano sold Depreciation of office equipment $ 925 per month During August, Marwick’s Pianos, Inc., sold and delivered 56 pianos. 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