Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells the
ID: 2489062 • Letter: M
Question
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $2,450 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $3,125 each. The selling and administrative costs that the company incurs in a typical month are presented below:
Depreciation of office equipment
$300 per month
Prepare an income statement for Marwick’s Pianos, Inc., for August. Use the traditional format, with costs organized by function.
Costs Cost Formula Selling: Advertising $700 per month Sales salaries and commissions $950 per month, plus 8% of sales Delivery of pianos to customers $30 per piano sold Utilities $350 per month Depreciation of sales facilities $800 per month Administrative: Executive salaries $2,500 per month Insurance $400 per month Clerical $1,000 per month, plus $20 per piano soldDepreciation of office equipment
$300 per month
Explanation / Answer
Solution.
Calculation of net income.
Particulars Cost Formula Amount Amount Sales $3,125 each. 125,000 Cost of goods sold $2,450 each (98,000) Gross margin 27,000 Selling and administrative expenses: Advertising $700 per month 700 Sales salaries and commissions $950 per month, plus 8% of sales 10,950 Delivery of pianos to customers $30 per piano sold 1,200 Utilities $350 per month 350 Depreciation of sales facilities $800 per month 800 Total Selling expenses 14,000 Administrative Expense: Executive salaries $2,500 per month 2,500 Insurance $400 per month 400 Clerical $1,000 per month, plus $20 per piano sold 1,800 Depreciation of office equipment $300 per month 300 Net Income 5,000 (19,000) 8,000Related Questions
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