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uranmaximum [27]
3 years ago
12

Amount 11,000 17 Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense p

er unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 21,000 $ 15,000 $ 10,000 $ 22,000 $ 86,000 Required: 1. Prepare a traditional income statement 2. Prepare a contribution format income statement.
Business
1 answer:
liubo4ka [24]3 years ago
8 0

Answer:

Question is incomplete. Complete question is given below:                                

Explanation:

Complete question may be written as:

Cherokee Inc. is a merchandiser that provided the following information: Number of units sold 11,000 Selling price per unit $ 17 Variable selling expense per unit $ 1 Variable administrative expense per unit $ 2 Total fixed selling expense $ 21,000 Total fixed administrative expense $ 15,000 Beginning merchandise inventory $ 10,000 Ending merchandise inventory $ 22,000 Merchandise purchases $ 86,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.      

<u>Solution</u>

<u>Given data</u>

Units sold = 11000

Selling Price = 17 per unit

Opening inventory = 10000

Closing inventory =  22000

Purchases = 86000

Variable selling price per unit = $ 1

Administrative selling price per unit = $ 2

Fixed Selling Expense = 21000

Fixed administrative expense = 15000

<u>Traditional Income Statement</u>:

Sales = Selling Price x Units sold = 11000 x 17 = 187000

Cost of goods sold = Opening inventory  + Purchases - Closing inventory

Cost of goods sold = 10000 + 86000 - 22000

Cost of goods sold = 74000

Selling expense = Variable selling expense + Fixed Selling price

Selling expense = ( 1 x 11000) + 21000 = 32000

Administrative expense = Variable administrative expense + Fixed administrative price

Administrative expense = ( 2 x 11000) + 15000 = 37000

Net Operating income under traditional income statement approach is = Sales - Cost of goods sold- Selling expense - Fixed Expense

Net Operating income under traditional income statement format = 187000 - 74000- 32000 - 37000 = 44000

<u>Contribution format income Statement</u>

Contribution Margin = Sales - Cost of goods sold- Variable selling expense- variable administrative expense

Contribution Margin = 187000 - 74000 - 11000 - 22000

Contribution margin =  80000

Net Operating income under contribution format income statement is = Contribution Margin - Fixed Selling Expense - Fixed administrative expense

Net Operating Income under contribution income statement format = 80000 - 21000 - 15000 = 44000.  

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