s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the

Question

s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,518 each from the manufacturer. Marwick's Pianos, Inc., sells the pianos to its customers at an average price of $3,300 each. The selling and administrative costs that the company incurs in a typical month are presented below Costs Selling Cost Formula Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities $958 per month 4.823 per month, plus 4% of sales $59 per piano sold $636 per month $5,046 per month Administrative $13,414 per month Executive salaries Insurance Clerical Depreciation of office equipment per month 52,547 per month, plus $41 per piano sold $890 per month During August, Marwick's Pianos, Inc., sold and delivered 56 planos Required: 1. Prepare an income statement for Marwick's Pianos, Inc, for August. Use the traditional format, with costs organized by function. (A "Net operating loss" should be entered as a negative number) Marwick's Pianos, Inc. Traditional Income Statement For the Month of August Selling and administrative expenses Selling expenses

Explanation / Answer

Traditional income statement Sales (56*3300) 184800 Cost of goods sold (56*1,518) 85008 Gross Margin 99792 Selling and administrative expenses Selling expenses Advertising 958 Sales salaries and commissions (4823+184800*4%) 12215 Delivery of pianos (56*59) 3304 Utilties 636 Depreciation of sales facilities 5,046 total selling expense 22159 Administrative expenses: Executive salaries 13,414 insurance 719 Clercial (2547+56*41) 4843 Depreciation of office Equipment 890 total administrative expense 19,866 total selling and administrative expense 42,025 Net operating income 57,767 Cotribution format income statement total per unit Sales 184800 3,300 Variable expenses Sales salaries and commissions 7392 132 Delvery of pianos 3304 59 Clercial 2296 41 cost of goods sold 85008 1,518 total variable expense 98000 1750 Contribution margin 86800 1550 Fixed expenses Advertising 958 Sales salries and commissions 4,823 utilities 636 depreciation of office equipment 890 Depreciation of sales facilities 5,046 Exceutive salaries 13,414 insurance 719 clercial 2,547 total fixed expense 29033 net operating income 57767

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