Question 1 (of 4) Exercise 2-6 Traditional and Contribution Format Income Statem

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Question 1 (of 4) Exercise 2-6 Traditional and Contribution Format Income Statements [ Cherokee Inc. is a merchandiser that provided the following information: 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 14,000 17 $ 22,000 $ 15,000 S 9,000 S 25,000 S 88,000 Required 1. Prepare a traditional income statement. CHEROKEE, INC Traditional Income Statement S 238,000 74,000 164,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Ending merchandise inventory 22,000 15,000 25,000 88,000 50,000 S 14,000 t operating income

Explanation / Answer

Explanation:1)

Cost of goods sold: ($9,000 + $88,000 – $25,000) = $72,000

Variable Selling expenses: ($2 per unit × 14,000 units) = $28,000

Variable Administrative expenses: ($2 per unit × 14,000 units) = $28,000

Cherokee Inc, Contribution format Income Statement Sales 238,000 Varible Expenses : Cost of Goods Sold 72,000 Selling Expenses 28,000 Administrative Expenses 28,000    128,000 Contribution Margin 110,000 Fixed Expenses : Selling Expenses 22,000 Administrative Expenses 15,000 37,000 Net Operative Income 73,000

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