Marwicks Pianos Inc purchases pianos from a large manufactur

Marwick\'s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1.505 per unit and then s customers for an average price of $2,500 each. The company\'s selling and administrative costs for a typical month are presented below Cost Formula Costs Selling: Advertising sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities $936 per month $4,819 per month, plus 4% of sales $58 per piano sold $630 per month $5,002 per month Administrative: Executive salaries Insurance Clerical Depreciation of office equipment $13,410 per month $685 per month $2,460 per month, plus $36 per piano sold $936 per month During August, Marwick\'s Pianos, Inc., sold and delivered 61 planos Required: a contibution format income statement for August, Show costs and revenues on both a total and a per unit basis down through contribution margin.

Solution

1.

Marwick’s Pianos, Inc.
Income Statement
For the Month of August

Sales (61 pianos × $2,500 per piano)...........

$152,500

Cost of goods sold
(61 pianos × $1,505 per piano).................

   91,805

Gross margin.............................................

60,695

Selling and administrative expenses:

Selling expenses:

Advertising...........................................

$    936

Sales salaries and commissions
[$4819 + (4% × $152,500)].................

10,919

Delivery of pianos
(61 pianos × $58 per piano).................

3,538

Utilities.................................................

630

Depreciation of sales facilities..................

     5,002

Total selling expenses...............................

21,025

Administrative expenses:

Executive salaries..................................

13,410

Insurance.............................................

685

Clerical
[$2,460 + (61 pianos × $36 per piano)].

4,656

Depreciation of office equipment.............

     936

Total administrative expenses....................

  19,687

Total selling and administrative expenses......

   40,712

Net operating income.................................

$19,983

Problem 5-11 (continued)

2.

Marwick’s Pianos, Inc.
Income Statement
For the Month of August

Total

Per
Piano

Sales (61 pianos × $2,500 per piano)..............

$152,500

$2,500

Variable expenses:

Cost of goods sold
(61 pianos × $1,505 per piano)..................

91,805

1,505

Sales commissions (4% × $152,500).............

6,100

100

Delivery of pianos (61 pianos × $58 per piano).....................................................

3,538

58

Clerical (61 pianos × $36 per piano)..............

      1,830

      36

Total variable expenses..................................

103,273

  1,699

Contribution margin.......................................

   49,227

$ 801

Fixed expenses:

Advertising.................................................

936

Sales salaries.............................................

4,819

Utilities......................................................

630

Depreciation of sales facilities.......................

5,002

Executive salaries.......................................

13,410

Insurance..................................................

685

Clerical......................................................

2,460

Depreciation of office equipment...................

       936

Total fixed expenses......................................

     29,244

Net operating income....................................

$   19,983

1.	Marwick’s Pianos, Inc. Income Statement For the Month of August
	Sales (61 pianos × $2,500 per piano)...........		$152,500
	Cost of goods sold (61 pianos × $1,505 per piano).................		91,805
	Gross margin.............................................		60,695
	Selling and administrative expenses:
	Selling expenses:
	Advertising...........................................	$    936
	Sales salaries and commissions [$4819 + (4% × $152,500)].................	10,919
	Delivery of pianos (61 pianos × $58 per piano).................	3,538
	Utilities.................................................	630
	Depreciation of sales facilities..................	5,002
	Total selling expenses...............................	21,025
	Administrative expenses:
	Executive salaries..................................	13,410
	Insurance.............................................	685
	Clerical [$2,460 + (61 pianos × $36 per piano)].	4,656
	Depreciation of office equipment.............	936
	Total administrative expenses....................	19,687
	Total selling and administrative expenses......		40,712
	Net operating income.................................		$19,983