Question

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,516 per unit and then sells them to retail customers for an average price of $2,500 each. The company’s selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$	943 per month
Sales salaries and commissions	$	4,787 per month, plus 5% of sales
Delivery of pianos to customers	$	62 per piano sold
Utilities	$	646 per month
Depreciation of sales facilities	$	5,089 per month
Administrative:
Executive salaries	$	13,408 per month
Insurance	$	706 per month
Clerical	$	2,547 per month, plus $40 per piano sold
Depreciation of office equipment	$	931 per month

During August, Marwick’s Pianos, Inc., sold and delivered 61 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

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.