Question

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales $ 345,000 Beginning merchandise inventory $ 23,000 Purchases $ 230,000 Ending merchandise inventory $ 11,500 Fixed selling expense $ ? Fixed administrative expense $ 13,800 Variable selling expense $ 17,250 Variable administrative expense $ ? Contribution margin $ 69,000 Net operating income $ 20,700 Required: 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. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales?

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Q= 1,000 units sold

Sales $ 345,000

Beginning merchandise inventory $ 23,000

Purchases $ 230,000

Ending merchandise inventory $ 11,500

Fixed selling expense $ ?

Fixed administrative expense $ 13,800

Variable selling expense $ 17,250

Variable administrative expense $ ?

Contribution margin $ 69,000

Net operating income $ 20,700

Cost of goods sold (COGS)= beginning inventory + purchases - ending inventory= 23000 + 230000 - 11500= $241,500

1) Revenue= 345000

COGS= 241500

Variable selling expense= 17250

Variable administrative expense= ? =17250 (345000 - 241500 - 17250 - 69000)

Contribution margin= 69000

Fixed selling expense= ? = 34500 (69000 - 13800 - 20700)

Fixed administrative expense= 13,800

Net income= 20,700

2) Sales= 345,000

COGS= 241500

Gross profit= 103500

Adminstrative expense= 31050

Selling expense= 51750

Net income= 20700

3) Selling price per unit= total sales/Q= 345000/1000= $345

4) Variable cost per unit= total variable cost/Q= (241500+17250+17250)= $276000/1000= $276

5) Contribution margin per unit= 69000/1000= 69

6) The contribution format income statement is better because it shows directly the impact of each unit in the contribution margin.