Contribution Format versus Traditional Income Statement

Marwick's Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level.

The pianos cost, on the average, $$125$ each from the manufacturer. Marwick's Pianos, Inc., sells the

pianos to its customers at an average price of $$250$ each. The selling and administrative costs that the

company incurs in a typical month are presented below:

During June, Marwick's Pianos, Inc., sold and delivered $100$ pianos.

Required:

$(1).$ Prepare an income statement for Marwick's Pianos, Inc., for June. Use the traditional format, with

costs organized by function.

$(2).$ Redo $(1)$ above, 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.

$(3).$ Refer to the income statement you prepared in $(2)$ above. Why might it be misleading to show the

fixed costs on a per unit basis?