Marwicks Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $2,450 each from the manufacturer. Marwicks Pianos, Inc., sells the pianos to its customers at an average price of $3,125 each. The selling and administrative costs that the company incurs in a typical month are presented below

During August, Marwicks Pianos, Inc., sold and delivered 40 pianos.

Required:

• 1. Prepare an income statement for Marwicks Pianos, Inc., for August. 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?