HW LO 26 27 EXERCISE 2-6 Traditional and Contribution Format Income Statements [LO 2-6] Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold.. 20,000 Selling price per unit. Variable selling expense per unit. $30 $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 Merchandise purchases... $44,000 $180,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement. EXERCISE 2-7 Differential, Opportunity, and Sunk Costs [LO 2-7] Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. The hospital's Radiology Department is considering replacing an old inefficient X-ray machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-ray. It would also require less power and would use a color laser printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital's management to buy a new DNA analyzer. Required: For each of the items below, indicate by placing an X in the appropriate column whether it should be considered a differential cost, an opportunity cost, or a sunk cost in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, leave all columns blank. Item Ex. Cost of X-ray film used in the old machine.... 1. Cost of the old X-ray machine... 2. The salary of the head of the Radiology Department.... 3. The salary of the head of the Pediatrics Department 4. Cost of the new color laser printer.... 5. Rent on the space occupied by Radiology.. 6. The cost of maintaining the old machine. 7. Benefits from a new DNA analyzer.... 8. Cost of electricity to run the X-ray machines.. Differential Opportunity Sunk Cost Cost Cost