Question
Marwicks Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,505 per unit and then sells them to retail customers for
Marwicks Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,505 per unit and then sells them to retail customers for an average price of $3,500 each. The companys selling and administrative costs for a typical month are presented below:
Costs | Cost Formula | |
Selling: | ||
Advertising | $ | 940 per month |
Sales salaries and commissions | $ | 4,775 per month, plus 3% of sales |
Delivery of pianos to customers | $ | 62 per piano sold |
Utilities | $ | 653 per month |
Depreciation of sales facilities | $ | 4,952 per month |
Administrative: | ||
Executive salaries | $ | 13,436 per month |
Insurance | $ | 692 per month |
Clerical | $ | 2,458 per month, plus $42 per piano sold |
Depreciation of office equipment | $ | 905 per month |
During August, Marwicks Pianos, Inc., sold and delivered 61 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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