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4 October, 17:32

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?

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  1. 4 October, 19:49
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    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.
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