Homework SourseMarwicks Pianos Inc purchases pianos from a large manufactur
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,510 per unit and then sells them to retail customers for an average price of $2,600 each. The company’s selling and administrative costs for a typical month are presented below:
During August, Marwick’s Pianos, Inc., sold and delivered 62 pianos.
Required:
1. Prepare a traditional format income statement for August.
2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.
| Costs | Cost Formula | |
| Selling: | ||
| Advertising | $ | 937 per month |
| Sales salaries and commissions | $ | 4,819 per month, plus 5% of sales |
| Delivery of pianos to customers | $ | 62 per piano sold |
| Utilities | $ | 669 per month |
| Depreciation of sales facilities | $ | 5,040 per month |
| Administrative: | ||
| Executive salaries | $ | 13,523 per month |
| Insurance | $ | 691 per month |
| Clerical | $ | 2,491 per month, plus $37 per piano sold |
| Depreciation of office equipment | $ | 898 per month |
Solution
Solution 1:
Solution 2:
| Traditional Income Statement - Marwick Pianos Inc. | ||
| Particulars | Details | Amount |
| Sales (2600*62) | $161,200.00 | |
| Less: Cost of Goods Sold (1510*62) | $93,620.00 | |
| Gross Profit | $67,580.00 | |
| Sellling Expenses: | ||
| Advertising | $937.00 | |
| Sales Salaries and Commissions (4819 + 5% of 161200) | $12,879.00 | |
| Delivery of Pianos to customers (62*62) | $3,844.00 | |
| Utilities | $669.00 | |
| Depreciation of Sales Facilities | $5,040.00 | $23,369.00 |
| Administrative Expenses: | ||
| Executive Salaries | $13,523.00 | |
| Insurance | $691.00 | |
| Clerical (2491 + 37*62) | $4,785.00 | |
| Depreciation of office equipment | $898.00 | $19,897.00 |
| Net Income | $24,314.00 |
