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Income Statements: Contribution Format Analysis

The document shows an income statement for Cherokee Inc. in a contribution margin format. It displays sales, variable expenses including cost of goods sold, variable selling expenses, and variable administrative expenses to calculate contribution margin. It then subtracts fixed expenses of selling and administrative to calculate net operating income.

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shanto sam
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3 views2 pages

Income Statements: Contribution Format Analysis

The document shows an income statement for Cherokee Inc. in a contribution margin format. It displays sales, variable expenses including cost of goods sold, variable selling expenses, and variable administrative expenses to calculate contribution margin. It then subtracts fixed expenses of selling and administrative to calculate net operating income.

Uploaded by

shanto sam
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

PAGE #48, EXERCISE 1-6

Cherokee Inc.
Income Statement [Contribution Margin format]
…………
Particulars Amount Total
Sales [20,000 units X $30] $600,000
Less: Variable Expense
COST OF GOODS SOLD:
Beginning Merchandise Inventory $24,000
Add: Merchandise Purchase 180,000
Less: Ending Merchandise Inventory (44,000)
Variable cost of goods sold $160,000

Variable Selling Expense [20,000 units X $4] 80,000


Variable Administrative Expense [20,000 units X $2] 40,000
($280,000)
CONTRIBUTION MARGIN [Sales- Variable $320,000
Expense]
Less: Fixed Expense
Selling Expense 40,000
Administrative Expense 30,000
($70,000)
Net Operating Income $250,000

Traditional Format
Sales
Less: Cost of goods sold
Gross Margin
Less: Selling expense [Variable + Fixed]
Administrative Expense [Variable + Fixed]
Net Operating Income

Page #53
Problem 1-21
Requirement (2)
Marwick’s Pianos
Income Statement [Contribution format]
For the month ended August 30,….

Particulars Amount Total Unit cost


Sales [40 pianos X $3,125] $125,000 $3,125
Less: Variable Cost:
Cost of goods sold [40 pianos X $2,450] $98,000 2,450
Sales Commission [8% of Sales $125,000] 10,000 250
Delivery of pianos to customers [$30 X 40 1,200 30
pianos]
Clerical [40 pianos X $20] 800 20
Total variable expense $110,000 $2,750

CONTRIBUTION MARGIN [Sales- VC] $15,000 $375


Less: Fixed Cost:
Advertising 700
Sales Salaries 950
Utilities 350
Depreciation on Sales facilities 800
Executive Salaries 2,500
Insurance 400
Clerical 1,000
Depreciation on office equipment 300
Total Fixed Cost 7,000

NET OPERATING INCOME $8,000


Sales Salaries and commission [$950 + (8% of $125,000)]= $10,950
Clerical [$1,000 + (40 pianos X $20)]= $1,800

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