PROBLEM 1-21

Chapter 1 PROBLEM 1-21 Traditional and Contribution Format Income Statements LO1-6 Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $2,450 per unit and then sells them to retail customers for an average price of $3,125 each. The company's selling and administrative costs for a typical month are presented below: Costs Cost Formula Selling: Advertising Sales salaries and commissions. Delivery of pianos to customers. $700 per month $950 per month, plus 8% of sales $30 per piano sold $350 per month $800 per month Utilities .... Depreciation of sales facilities Administrative: Executive salaries Insurance Clerical Depreciation of office equipment..... $2,500 per month $400 $1,000 per month, plus $20 per piano sold $300 per month per month During August, Marwick's Pianos, Inc., sold and delivered 40 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 10 and a per unit basis down through contribution margin. 3. Refer to the income statement