Answer:
Todrick Company
1. Contribution format income statement:
Sales $ 240,000
Beginning merchandise inventory $ 16,000
Purchases $ 160,000
Ending merchandise inventory ( $ 8,000)
Cost of goods sold 168,000
Variable selling expense $ 12,000
Variable administrative expense $ 12,000 192,000
Contribution margin $ 48,000
Fixed selling expense $ 24,000
Fixed administrative expense $ 9,600 33,600
Net operating income $ 14,400
2. Traditional format income statement:
Sales $ 240,000
Beginning merchandise inventory $ 16,000
Purchases $ 160,000
Ending merchandise inventory ( $ 8,000)
Cost of goods sold 168,000
Gross profit $72,000
Fixed selling expense $ 24,000
Fixed administrative expense $ 9,600
Variable selling expense $ 12,000
Variable administrative expense $ 12,000 57,600
Net operating income $ 14,400
3. Selling price per unit:
Sales revenue/1,000 = $240,000/1,000 = $240
4. Variable cost per unit:
Total variable costs/1,000
= $192,000/1,000
= $192
5. Contribution margin per unit:
= Selling price minus variable cost per unit
= $240 - 192
= $48
6. Contribution format income statement will be more useful because it calculates the contribution margin per unit, which can be used to estimate the net operating income changes in response to changes in unit sales.
Explanation:
a) Data and Calculations:
Quantity of goods sold = 1,000 units
Variable administrative expense:
Total variable cost = $192,000 ($240,000 - 48,000)
Less:
Cost of goods sold 168,000
Variable selling expense 12,000
Variable admin. expense $12,000
Fixed selling expense:
Total fixed expense $33,600 ($48,000 - 14,400)
less:
Fixed admin. expense $ 9600
Fixed selling expense $24,000
