Question

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales $ 405,000 Beginning merchandise inventory $ 27,000 Purchases $ 270,000 Ending merchandise inventory $ 13,500 Fixed selling expense $

Answer 1

Missing information:

Fixed administrative expense $ 16,200 Variable selling expense $ 20,250 Variable administrative expense $ ? Contribution margin $ 81,000 Net operating income $ 24,300

1. Prepare a contribution format income statement.

2. Prepare a traditional format income statement.

3. Calculate the selling price per unit.

4. Calculate the variable cost per unit.

5. Calculate the contribution margin per unit.

Answer:

First we must determine cost of goods sold = $27,000 + $270,000 - $13,500 = $283,500

now we must find total variable costs = total sales - contribution margin = $405,00 - $81,000 = $324,000

variable administrative expenses = total variable costs - COGS - variable selling expense = $324,000 - $283,500 - $20,250 = $20,250

1. Prepare a contribution format income statement.

Total sales                                                              $405,000

Cost of goods sold                                                $283,500

Gross contribution margin                                      $121,500

Variable selling expense                                        $20,250

Variable adm. expense                                          $20,250

Contribution margin                                                $81,000

Fixed period expenses:

• Fixed selling expense                                   $40,500
• Fixed administrative expense                       $16,200

Net operating income                                            $24,300

2. Prepare a traditional format income statement.

Total sales                                                              $405,000

Cost of goods sold                                                $283,500

Gross profit                                                              $121,500

Operating expenses:

Selling expenses                                                     $60,750

Adm. expenses                                                       $36,450

Net operating income                                            $24,300

3. Calculate the selling price per unit.

• $405

4. Calculate the variable cost per unit.

• $324

5. Calculate the contribution margin per unit.

• $81