Answer Happy

Marwick's Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,515 per unit and then sells them to retail customers for an average price of $2,600 each. The company's selling and administrative costs for a typical month are presented below: Costs Selling: Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Cost Formula $968 per month $4,771 per month, plus 3% of sales $62 per piano sold $661 per month $4,960 per month Depreciation of sales facilities Administrative: Executive salaries Insurance Clerical Depreciation of office equipment During August, Marwick's Pianos, Incorporated, sold and delivered 63 pianos. $13,449 per month $719 per month $2,478 per month, plus $45 per piano sold $853 per month 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.

Traditional Income Statement For the Month of August Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses: Advertising Delivery of pianos Sales salaries and commissions ✔ Depreciation of sales facilities Utilities Total selling expenses Administrative expenses: Executive salaries. Depreciation of office equipment Clerical Insurance Total administrative expenses Total selling and administrative expenses Net operating income $ 968 3,906 9,385 X 4,960 661 19,880 13,449 853 5,313 719 20,334 $ 163,800 95,445 68,355 40,214 $ 28,141 X

Marwick's Pianos, Incorporated Contribution Format Income Statement For the Month of August Sales Variable expenses: Cost of goods sold Delivery of pianos Sales salaries and commissions Clerical Total variable expenses Contribution margin. Fixed expenses: Advertising Sales salaries and commissions Utilities Depreciation of sales facilities Executive salaries Depreciation of office equipment Clerical Insurance Total fixed expenses ✔ ♥ ♥ Total $ 163,800 0 Per Piano 0