Question
2. Prepare an income statement for Marwicks Pianos, Inc., for August, this time using the contribution format, with costs organized by behavior. Show costs and
2. Prepare an income statement for Marwicks Pianos, Inc., for August, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin
2.
value: 10.00 points
Marwicks Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,485 each from the manufacturer. Marwicks Pianos, Inc., sells the pianos to its customers at an average price of $2,600 each. The selling and administrative costs that the company incurs in a typical month are presented below: |
Costs | Cost Formula |
Selling: | |
Advertising | $947 per month |
Sales salaries and commissions | $4,804 per month, plus 5% of sales |
Delivery of pianos to customers | $60 per piano sold |
Utilities | $652 per month |
Depreciation of sales facilities | $4,943 per month |
Administrative: | |
Executive salaries | $13,525 per month |
Insurance | $681 per month |
Clerical | $2,459 per month, plus $40 per piano sold |
Depreciation of office equipment | $945 per month |
During August, Marwicks Pianos, Inc., sold and delivered 62 pianos. |
Required: | |
1. | Prepare an income statement for Marwicks Pianos, Inc., for August. Use the traditional format, with costs organized by function. |
2. | Prepare an income statement for Marwicks Pianos, Inc., for August, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin. |
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