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Problem 1-21 Traditional and Contribution Format Income Statements [LO1-6]

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,488 per unit and then sells them to retail customers for an average price of $2,700 each. The company’s selling and administrative costs for a typical month are presented below:

Costs Cost Formula
Selling:
Advertising $ 952 per month
Sales salaries and commissions $ 4,824 per month, plus 4% of sales
Delivery of pianos to customers $ 58 per piano sold
Utilities $ 662 per month
Depreciation of sales facilities $ 4,929 per month
Administrative:
Executive salaries $ 13,455 per month
Insurance $ 697 per month
Clerical $ 2,464 per month, plus $43 per piano sold
Depreciation of office equipment $ 903 per month

During August, Marwick’s Pianos, Inc., sold and delivered 56 pianos.

Required:

1. Prepare a traditional format income statement for August.
2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.

repare a traditional format income statement for August. (A "Net operating loss" should be entered as a negative number.)

Marwick's Pianos, Inc.
Traditional Income Statement
For the Month of August
Sales $
Cost of goods sold
Gross margin
Selling and administrative expenses:
Selling expenses:
Advertising
Sales salaries and commissions
Utilities
Depreciation of sales facilities
Delivery of pianos
Total selling expenses 0
Administrative expenses:
Insurance
Executive salaries
Depreciation of office equipment
Clerical
Total administrative expenses 0
Total selling and administrative expenses 0
Net operating income $
  • Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin. (A "Net operating loss" should be entered as a negative number.)

    Marwick's Pianos, Inc.
    Contribution Format Income Statement
    For the Month of August
    Total Per Piano
    Sales
    Variable expenses:
    Clerical
    Sales salaries and commissions
    Delivery of pianos
    Cost of goods sold
    Total variable expenses 0 0
    Contribution margin
    Fixed expenses:
    Advertising
    Depreciation of sales facilities
    Utilities
    Executive salaries
    Insurance
    Depreciation of office equipment
    Clerical
    Sales salaries and commissions
    Total fixed expenses 0
    Net operating income
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