Question
Marwicks Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,499 per unit and then sells them to retail customers for
Marwicks Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,499 per unit and then sells them to retail customers for an average price of $2,900 each. The companys selling and administrative costs for a typical month are presented below:
Costs | Cost Formula |
---|---|
Selling: | |
Advertising | $956 per month |
Sales salaries and commissions | $4,773 per month, plus 4% of sales |
Delivery of pianos to customers | $60 per piano sold |
Utilities | $640 per month |
Depreciation of sales facilities | $4,972 per month |
Administrative: | |
Executive salaries | $13,483 per month |
Insurance | $712 per month |
Clerical | $2,505 per month, plus $42 per piano sold |
Depreciation of office equipment | $907 per month |
During August, Marwicks Pianos, Incorporated, 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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