Todrick Company is a merchandiser that reported the followin

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:

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.

Sales	$	465,000
Beginning merchandise inventory	$	31,000
Purchases	$	310,000
Ending merchandise inventory	$	15,500
Fixed selling expense	$	?
Fixed administrative expense	$	18,600
Variable selling expense	$	23,250
Variable administrative expense	$	?
Contribution margin	$	93,000
Net operating income	$	27,900

Req 1 Req 2 Req 3 to 5 Req 6 Prepare a contribution format income statement. Todrick Company Contribution Format Income Statement Sales $465,000 Variable expenses: Cost of goods sold Selling expense Administrative expense $325,500 23,250 23,250 372,000 Fixed expenses: Selling expense Administrative expense $ 46,500 18,600 65,100 Net operating income $ 27,900

Solution

Since answer to Requirement 1& 2 are already provided in the question, the following answers are for the remaining parts:

3. Sales = $465,000

Number of units = 1,000

Selling price per unit = $465

4. Variable cost = $46,500

Number of units = 1,000

Variable cost per unit = $46.5

5. Contribution = $372,000

Number of units = 1,000

Contribution per unit = $372

6. Contribution format of income statement would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales. This is due to the fact that in Contribution format variable expenses are shown separately which will help the managers in estimating the changes in responses to changes in unit sales. As the unit changes the variable cost will change.