Exercise 1-6 Traditional and Contribution Format Income Statements [LO1-6] Cherokee Inc. is a merchandiser that provided the following information: Number of units sold 14,000 Selling price per unit $ 16 Variable selling expense per unit $ 2 Variable administrative expense per unit $ 2 Total fixed selling expense $ 18,000 Total fixed administrative expense $ 16,000 Beginning merchandise inventory $ 11,000 Ending merchandise inventory $ 23,000 Merchandise purchases $ 85,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.

Exercise 1-6 Traditional and Contribution Format Income Statements [LO1-6]

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

Number of units sold		14,000
Selling price per unit	$	16
Variable selling expense per unit	$	2
Variable administrative expense per unit	$	2
Total fixed selling expense	$	18,000
Total fixed administrative expense	$	16,000
Beginning merchandise inventory	$	11,000
Ending merchandise inventory	$	23,000
Merchandise purchases	$	85,000

Required:

1.

Prepare a traditional income statement.

Cherokee, Inc.
Traditional Income Statement
Sales		$224,000
Cost of goods sold		73,000
Gross margin		151,000
Selling and administrative expenses:
Selling expenses	46,000
Administrative expenses
Net operating income

2.

Prepare a contribution format income statement

Cherokee, Inc.
Contribution Format Income Statement
Variable expenses:
		0
Fixed expenses:
		0