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		13,000
Selling price per unit	$	17
Variable selling expense per unit	$	2
Variable administrative expense per unit	$	2
Total fixed selling expense	$	20,000
Total fixed administrative expense	$	14,000
Beginning merchandise inventory	$	8,000
Ending merchandise inventory	$	22,000
Merchandise purchases	$	88,000

Required:

1.

Prepare a traditional income statement.

Cherokee, Inc.
Traditional Income Statement
Sales		$221,000
Cost of goods sold		74,000
Gross margin		147,000
Selling and administrative expenses:
Administrative expenses	40,000
Selling expenses	46,000
		86,000
Net operating income		$61,000

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2.

Prepare a contribution format income statement.

Cherokee, Inc.
Contribution Format Income Statement
Sales
Variable expenses:
Cost of goods sold
		0
Fixed expenses:
		0
Net operating income

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