Question
Marwicks Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,498 per unit and then sells them to retail customers for
Marwicks Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,498 per unit and then sells them to retail customers for an average price of $3,000 each. The companys selling and administrative costs for a typical month are presented below:
Costs | Cost Formula | |
Selling: | ||
Advertising | $ | 943 per month |
Sales salaries and commissions | $ | 4,771 per month, plus 3% of sales |
Delivery of pianos to customers | $ | 57 per piano sold |
Utilities | $ | 648 per month |
Depreciation of sales facilities | $ | 5,084 per month |
Administrative: | ||
Executive salaries | $ | 13,508 per month |
Insurance | $ | 702 per month |
Clerical | $ | 2,480 per month, plus $41 per piano sold |
Depreciation of office equipment | $ | 871 per month |
During August, Marwicks Pianos, Inc., sold and delivered 60 pianos.
Required:
1. Prepare a traditional format income statement for August. 2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.
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