Question

Steins purchases pianos from a large manufacturer for an average cost of $1,509 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	$	948 per month
Sales salaries and commissions	$	4,821 per month, plus 5% of sales
Delivery of pianos to customers	$	59 per piano sold
Utilities	$	663 per month
Depreciation of sales facilities	$	4,908 per month
Administrative:
Executive salaries	$	13,493 per month
Insurance	$	703 per month
Clerical	$	2,532 per month, plus $39 per piano sold
Depreciation of office equipment	$	937 per month

During August, Steins sold and delivered 62 pianos.

Required:

1. Prepare a traditional format income statement for August. (8 points)
2. Prepare a contribution format income statement for August. (8points)

Answer 1