Problem 1-19 Traditional and Contribution Format Income Statements [LO1-6]

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:

Sales	$	285,000
Beginning merchandise inventory	$	19,000
Purchases	$	190,000
Ending merchandise inventory	$	9,500
Fixed selling expense	$	?
Fixed administrative expense	$	11,400
Variable selling expense	$	14,250
Variable administrative expense	$	?
Contribution margin	$	57,000
Net operating income	$	17,100

Required:

1. Prepare a contribution format income statement.

2. Prepare a traditional format income statement.

3. Calculate the selling price per unit.

4. Calculate the variable cost per unit.

5. Calculate the contribution margin per unit.

6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales?

Prepare a contribution format income statement.

Todrick Company
Contribution Format Income Statement
Sales
Variable expenses:
Cost of goods sold
Selling expense
Administrative expense
		0
Contribution margin
Fixed expenses:
Selling expense
Administrative expense
		0
Net operating income