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Question & Answer: Prepare a traditional income statement. Prepare a contribution format income statement……

Cherokee Inc. is a merchandiser that provided the following information 20,000 $30 Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 40,000 $ 30,000 $ 24,000 $44,000 $ 180,000 Required Prepare a traditional income statement Cherokee, Inc Traditional Income Statement Selng and administrative expenses Prepare a contribution format income statement. Cherokee, Inc. Contribution Format Income Statement Variable expenses Fixed expenses

Cherokee Inc. is a merchandiser that provided the following information Required: Prepare a traditional income statement. Prepare a contribution format income statement.

Expert Answer

 

1. Traditional Income Sttement

Sales (20,000X30) 600000

Cost of goods sold (24,000+180,000-44,000) (160,000)

Gross margin 440,000

Selling and administration expenses:

Selling expenses ( 20,000X4)+ 40,000 120,000

administrative expenses (20,000X2)+30,000 70,000 (190,000)

 

Net operating income 250,000

2. contribution format income statement

sales (20,000X30) 600,000

variable expenses:

cost of goods sold(24,000+180,000-44,000) (160,000)

selling expenses ( 20,000X4) (80,000) administrative expenses (20,000X2) (40,000)

————–

contribution margin 320,000

Fixed expenses:

selling expenses   40,000

Administrative expenses   30,000   (70,000)

Net operating income 250,000

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