Question

The data in the table below are from the Acme Corporation, a merchandiser.

		Amount
Number of units sold		11,000
Selling price per unit	$	17
Variable selling expense per unit	$	1
Variable administrative expense per unit	$	1
Total fixed selling expense	$	19,000
Total fixed administrative expense	$	16,000
Beginning merchandise inventory	$	11,000
Ending merchandise inventory	$	22,000
Merchandise purchases	$	88,000

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.

Answer 1

Answer-1)-

ACME CORPORATION
TRADITIONAL INCOME STATEMENT
PARTICULARS	AMOUNT	AMOUNT
	$	$
Sales	11000 units*$17 per unit	187000
Less- Cost of goods sold		77000
Beginning merchandise inventory	$11000
Add- Merchandise purchases	$88000
Less- Ending merchandise inventory	$22000
Gross profit		110000
Less- Opertaing expenses
Administraive expenses	(11000 units*$1 per unit)+$16000	27000
Selling expenses	(11000 units*$1 per unit)+$19000	30000
Net operating Income		53000

2)-

ACME CORPORATION
CONTRBUTION FORMAT INCOME STATEMENT
PARTICULARS	AMOUNT	AMOUNT
	$	$
Sales	11000 units*$17 per unit	187000
Less- Variable costs
Cost of goods sold		77000
Beginning merchandise inventory	$11000
Add- Merchandise purchases	$88000
Less- Ending merchandise inventory	$22000
Administraive expenses	(11000 units*$1 per unit)	11000
Selling expenses	(11000 units*$1 per unit)	11000
Contribution margin		88000
Less- Fixed expenses
Administraive expenses		16000
Selling expenses		19000
Net operating Income		53000