Cherokee Inc is a merchandiser that provided the following i

Cherokee Inc. is a merchandiser that provided the following information:

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.

		Amount
Number of units sold		13,000
Selling price per unit	$	16
Variable selling expense per unit	$	2
Variable administrative expense per unit	$	3
Total fixed selling expense	$	21,000
Total fixed administrative expense	$	14,000
Beginning merchandise inventory	$	9,000
Ending merchandise inventory	$	23,000
Merchandise purchases	$	86,000

6 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 13,000 15 2 3 $ 19,000 $ 16,000 $ 12,000 $ 25,000 $ 86,000 Required: 1. Prepare a traditional income statement. Cherokee, Inc. Traditional Income Statement Selling and administrative expenses

Solution

Amount in $ Cherokee, Inc Traditional income Statement Sales revenue 13000*$15 195000 Less: Cost of goods sold $12000+$86000-$25000 -73000 Gross profit 122000 Less: Selling & Adminstrative expenses variable Selling Expenses 13000*$2 -26000 variable Administrative expenses 13000*$3 -39000 Fixed Selling Expenses -19000 Fixed Administrative expenses -16000 Operating Income 22000 Cherokee, Inc Contribution income Statement Sales revenue 13000*$15 195000 Variable expenses Cost of goods sold $12000+$86000-$25000 -73000 variable Selling Expenses 13000*$2 -26000 variable Administrative expenses 13000*$3 -39000 Contribution margin 57000 Fixed expenses Fixed Selling Expenses -19000 Fixed Administrative expenses -16000 Operating Income 22000