Question
In: Accounting
Traditional and Contribution Format Income Statements
Milden Company is a merchandiser that plans to sell 12,000 units during the next quarter at a selling price of $100 per unit. The company also gathered the following cost estimates for the next quarter:
Required:
1. Prepare a contribution format income statement for the next quarter.
2. Prepare a traditional format income statement for the next quarter.
Solutions
Expert Solution
1.
Milden Company
Contribution Format Income Statement
For the Next Quarter
Sales (12,000 units × $100 per unit)............ $1,200,000
Variable expenses:
Cost of goods sold (12,000 units × $35 unit)....................... $420,000
Sales commission (6% × $1,200,000)........ 72,000
Shipping expense (12,000 units × $9.10 per unit) .............. 109,200
Total variable expenses................................ 601,200
Contribution margin .................................... 598,800
Fixed expenses:
Advertising expense.................................. 210,000
Shipping expense ..................................... 28,000
Administrative salaries .............................. 145,000
Insurance expense ................................... 9,000
Depreciation expense................................ 76,000
Total fixed expenses .................................... 468,000
Net operating income .................................. $ 130,800
2.
Milden Company
Traditional Format Income Statement
For the Next Quarter
Sales (12,000 units × $100 per unit)............ $1,200,000
Cost of goods sold (12,000 units × $35 per unit).................... 420,000
Gross margin .............................................. 780,000
Selling and administrative expenses:
Advertising ............................................. $210,000
Sales commissions (6% × $1,200,000)]............................. 72,000
Shipping expense [$28,000 + (12,000 units × $9.10 per unit)].................................................. 137,200
Administrative salaries............................ 145,000
Insurance expense................................. 9,000
Depreciation expense ............................. 76,000
Total selling and administrative expenses...... 649,200
Net operating income .................................. $ 130,800
1.
Milden Company
Contribution Format Income Statement
For the Next Quarter
Sales (12,000 units × $100 per unit)............ $1,200,000
Variable expenses:
Cost of goods sold (12,000 units × $35 unit)....................... $420,000
Sales commission (6% × $1,200,000)........ 72,000
Shipping expense (12,000 units × $9.10 per unit) .............. 109,200
Total variable expenses................................ 601,200
Contribution margin .................................... 598,800
Fixed expenses:
Advertising expense.................................. 210,000
Shipping expense ..................................... 28,000
Administrative salaries .............................. 145,000
Insurance expense ................................... 9,000
Depreciation expense................................ 76,000
Total fixed expenses .................................... 468,000
Net operating income .................................. $ 130,800
2.
Milden Company
Traditional Format Income Statement
For the Next Quarter
Sales (12,000 units × $100 per unit)............ $1,200,000
Cost of goods sold (12,000 units × $35 per unit).................... 420,000
Gross margin .............................................. 780,000
Selling and administrative expenses:
Advertising ............................................. $210,000
Sales commissions (6% × $1,200,000)]............................. 72,000
Shipping expense [$28,000 + (12,000 units × $9.10 per unit)].................................................. 137,200
Administrative salaries............................ 145,000
Insurance expense................................. 9,000
Depreciation expense ............................. 76,000
Total selling and administrative expenses...... 649,200
Net operating income .................................. $ 130,800
devender singh answered 2 years agoRelated Solutions
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