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

	Amount
Number of units sold		20,000
Selling price per unit	$	30
Variable selling expense per unit	$	4
Variable administrative expense per unit	$	2
Total fixed selling expense	$	40,000
Total fixed administrative expense	$	30,000
Beginning merchandise inventory	$	24,000
Ending merchandise inventory	$	44,000
Merchandise purchases	$	180,000

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.

Required 1 Required 2. Prepare a traditional income statement. Cherokee, Inc. Traditional Income Statement Sales $ 600,000 Cost of goods sold (160,000) 440,000 $ Selling and administrative expenses: Variable manufacturing overhead Fixed manufacturing overhead Selling expenses Selling expenses Net operating income (40,000) (30,000) X (80,000) (40,000) (190,000) 250,000 $ (Required 1 Required 2 Prepare a contribution format income statement. Cherokee, Inc. Contribution Format Income Statement Sales $ 600,000 Variable expenses: (160,000) Cost of goods sold Variable manufacturing overhead (40,000) Selling expenses (80,000) Contribution margin (280,000) 320,000 Fixed expenses: Administrative expenses Selling expenses (30,000) (40,000) Net operating income (70,000) 250,000 $