Problem 1-19 Traditional and Contribution Format Income Statements [LO1-6] Probl

Question

Problem 1-19 Traditional and Contribution Format Income Statements [LO1-6]

Problem 1-19 Traditional and Contribution Format Income Statements [LO1-6] Todrick Company is a merchandiser that reported the following information based on 1,000 units sold Sales Beginning merchandise inventory Purchases Ending merchandise inventory Fixed selling expense Fixed administrative expense Variable selling expense Variable administrative expense Contribution margin Net operating income $ 345,000 $ 23,000 $ 230,000 $ 11,500 $ 13,800 $ 17,250 $69,000 $ 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?

Explanation / Answer

1 Contribution Format Income Statement Sales 345000 Variable expenses: Cost of goods sold 241500 Selling expense 17250 Administrative expense 17250 Total variable expense 276000 (345000-69000) Contribution margin 69000 Fixed expenses: Selling expense 34500 Administrative Expense 13800 Total fixed expenses 48300 (69000-20700) Net Operating Income 20700 2 Traditional Income Statement Sales 345000 Cost of goods sold 241500 Gross Margin 103500 Selling and Administrative expense Sellng Expenses 51750 Administrative expenses 31050 Total Selling and administrative expense 82800 Net Operating Income 20700 3 Selling Price per unit 345 (345000/1000) 4 Variable cost per unit 276 (276000/1000) 5 Contribution Format Income statement will be more useful.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.