Question 1 of 4 Exercise 26 Traditional and Contribution For

Question 1 (of 4) Exercise 2-6 Traditional and Contribution Format Income Statements [ Cherokee Inc. is a merchandiser that provided the following information: Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases 14,000 17 $ 22,000 $ 15,000 S 9,000 S 25,000 S 88,000 Required 1. Prepare a traditional income statement. CHEROKEE, INC Traditional Income Statement S 238,000 74,000 164,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Ending merchandise inventory 22,000 15,000 25,000 88,000 50,000 S 14,000 t operating income

Solution

Explanation:1)

Cost of goods sold: ($9,000 + $88,000 – $25,000) = $72,000

Variable Selling expenses: ($2 per unit × 14,000 units) = $28,000

Variable Administrative expenses: ($2 per unit × 14,000 units) = $28,000

Cherokee Inc,
Contribution format Income Statement
Sales		238,000
Varible Expenses :
Cost of Goods Sold	72,000
Selling Expenses	28,000
Administrative Expenses	28,000
		128,000
Contribution Margin		110,000
Fixed Expenses :
Selling Expenses	22,000
Administrative Expenses	15,000
		37,000
Net Operative Income		73,000