Marwicks Pianos Inc purchases pianos from a large manufactur

Marwick\'s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,498 per unit and then sells them to retail customers for an average price of $2,700 each. The company\'s selling and administrative costs for a typical month are presented below: Costs Selling: Cost Formula Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities $937 per month $4,810 per month, plus 3% of sales $59 per piano sold $665 per month $4,911 per montlh Administrative: Executive salaries Insurance Clerical Depreciation of office equipment $13,486 per month $687 per month $2,461 per month, plus $40 per piano sold 906 per month During August, Marwick\'s Pianos, Inc., sold and delivered 60 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

Solution

Part 1 - Traditional Income Statement

Marwick Pianos Inc

Traditional Income Statement

For the Month of August

Sales salary and commission

($4810) + ($162000*3%)

Delivery of pianos to customers

(60 Piano * $59)

Part 2 - Contribution Margin Income statement

Marwick Pianos Inc

Contribution margin income statement

For the month of august

Total Variable Expenses (B)

$100680

$1678

Particulars		Amount
Sales Revenue (60 Piano * $2700)		$162000
Less : Cost of Goods sold (60 Piano * $1498)		$89880
Gross Profit		$72120
Selling and Administrative expenses
Selling Expenses
Advertising expenses	$937
Sales salary and commission ($4810) + ($162000*3%)	$9670
Delivery of pianos to customers (60 Piano * $59)	$3540
Utilities	$665
Depreciation of sales facilities	$4911
Total Selling expenses (A)	$19723
Administrative expenses
Executive salary	$13486
Insurance	$687
Clerical ($2461) + (60 Piano*$40)	$4861
Depreciation of office equipment	$906
Total Administrative expenses (B)	$19940
Total selling and administrative expenses (A+B)		$39663
Net Income ($72120 - $39663)		$32457