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 $300,000 $ 20,000 $200,000 $7,000 Sales Beginning merchandise inventory Purchases Ending merchandise inventory Fixed selling expense Fixed administrative expense Variable selling expense Variable administrative expense Contribution marain Net operating income $ 12,000 $ 15,000 $ 60,000 $ 18,000 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. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales?

Solution

Traditional income statement:

6. Contribution income statement is more useful.

Particulars	Per unit	Total
Sales	300	3,00,000
Varible expenses
cost of goods sold	213	2,13,000
variable selling expense	15	15,000
variable administrative expense	12	12,000
Total variable expenses	240	2,40,000
Contribution margin	60	60,000
Fixed expenses
Fixed selling expense		30,000
Fixed administrative expense		12,000
Total fixed expenses		42,000
Net income		18,000