In: Accounting
Cherokee Inc. is a merchandiser that provided the following information:
Amount | ||
Number of units sold | 14,000 | |
Selling price per unit | $ | 17 |
Variable selling expense per unit | $ | 2 |
Variable administrative expense per unit | $ | 2 |
Total fixed selling expense | $ | 21,000 |
Total fixed administrative expense | $ | 14,000 |
Beginning merchandise inventory | $ | 8,000 |
Ending merchandise inventory | $ | 23,000 |
Merchandise purchases | $ | 87,000 |
Required:
1. Prepare a traditional income statement.
2. Prepare a contribution format income statement.
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Required 1 : | ||
Beginning merchandise inventory | 8000 | |
(+) Merchandise purchases | 87000 | |
(-) Ending merchandise inventory | 23000 | |
Cost of goods sold | 72000 | |
Cherokee, Inc. | ||
Traditional Income Statement | ||
Sales ( 14000 * 17 ) | 238000 | |
(-) Cost of goods sold | 72000 | |
Gross profit | 166000 | |
Selling and administrative expenses: | ||
Total Variable selling expense ( 14000 * 2 ) | 28000 | |
Total Variable administrative expense ( 14000 * 2 ) | 28000 | |
Total fixed selling expense | 21000 | |
Total fixed administrative expense | 14000 | 91000 |
Net income |
75000 |
Required 2 : | ||
Cherokee, Inc. | ||
Contribution format income statement | ||
Sales | 238000 | |
Variable expense : | ||
Cost of goods sold | 72000 | |
Selling expense | 28000 | |
Administrative expense | 28000 | 128000 |
Contribution margin | 110000 | |
Fixed expenses : | ||
Selling expense | 21000 | |
Administrative expense | 14000 | 35000 |
Net income | 75000 |