Marwick\'s Pianos, Inc., purchases pianos from a large manufacturer and sells th

Question

Marwick's Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,519 each from the manufacturer. Marwick's Pianos, Inc., sells the pianos to its customers at an average price of $2,200 each. The selling and administrative costs that the company incurs in a typical month are presented below Cost Formula Selling Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities $963 per month $4,828 per month, plus 5% of sales $61 per piano sold $637 per month $4,994 per month Administrative Executive salaries Insurance Clerical Depreciation of office equipment $13,489 per month $713 per month $2,523 per month, plus $35 per piano sold $943 per month During August, Marwick's Pianos, Inc., sold and delivered 58 pianos

Explanation / Answer

Traditional income statement Sales (58*2200) 127600 Cost of goods sold (58*1519) 88102 Gross Margin 39498 Selling and administrative expenses Selling expenses Advertising 963 Sales salaries and commissions (4828+127600*5%) 11208 Delivery of pianos (61*58) 3538 Utilties 637 Depreciation of sales facilities 4,994 total selling expense 21340 Administrative expenses: Executive salaries 13,489 insurance 713 Clercial (2523+35*58) 4553 Depreciation of office Equipment 943 total administrative expense 19,698 total selling and administrative expense 41,038 Net operating income -1,540 Cotribution format income statement total per unit Sales 127600 2,200 Variable expenses Sales salaries and commissions 6380 110 Delvery of pianos 3538 61 Clercial 2030 35 cost of goods sold 88102 1,519 total variable expense 100050 1725 Contribution margin 27550 475 Fixed expenses Advertising 963 Sales salries and commissions 4,828 utilities 637 depreciation of office equipment 943 Depreciation of sales facilities 4,994 Exceutive salaries 13,489 insurance 713 clercial 2,523 total fixed expense 29090 net operating income -1540

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