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i need to know how they got each answer. the equations they used to solve them The Traditional Format Income Statement The left-hand side of

image text in transcribedi need to know how they got each answer. the equations they used to solve them
The Traditional Format Income Statement The left-hand side of Exhibit 1-7 shows a traditional income statement format for merchandising companies. This type of income statement organizes costs into two Categories-cost of goods sold and selling and administrative expenses. Sales minus cost of goods sold equals the gross margin. The gross margin minus selling and adminis- The cost of goods sold reports the product costs attached to the merchandise sold during the period. The selling and administrative expenses report all period costs that have been expensed as incurred. The cost of goods sold for a merchandising company $12,000 Sales. EXHIBIT 1-7 Comparing Traditional and Contribution Format Income Statements for Merchandising Companies (all numbers are given Traditional Format Contribution Format $12,000 Sales Cost of goods sold 6,000 Variable expenses Gross margin 6.000 Cost of goods sold $6,000 600 Selling and administrative expenses: Variable selling 400 $3.100 Variable administrative Administrative 1.900 5,000 Contribution margin Net operating income $ 1.000 Fixed expenses Fixed selling 2,500 Fixed administrative 1,500 Net operating income 7.000 Selling 5,000 4,000 $ 1,000 For a manufacturing company, the cost of goods sold would include some variable costs, such as direct materials. direct labor, and variable overhead, and some fixed costs, such as fixed manufacturing overhead. Income statement formats for manufacturing companies will be explored in greater detail in a subsequent chapter 4 Subsequent chapters compare the income statement formats for manufacturing companies

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