Problem 1-21 Traditional and Contribution Format Income Statements [LO1-6]

Marwicks Pianos, Inc., 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 $3,200 each. The companys selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$	947 per month
Sales salaries and commissions	$	4,823 per month, plus 5% of sales
Delivery of pianos to customers	$	57 per piano sold
Utilities	$	666 per month
Depreciation of sales facilities	$	4,911 per month
Administrative:
Executive salaries	$	13,514 per month
Insurance	$	719 per month
Clerical	$	2,475 per month, plus $43 per piano sold
Depreciation of office equipment	$	943 per month

During August, Marwicks Pianos, Inc., sold and delivered 63 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.

Marwick's Pianos, Inc. Traditional Income Statement For the Month of August Sales Cost of goods sold Gross margin Selling and administrative expenses Selling expenses Advertising Sales salaries and commissions Utilities Depreciation of sales facilities Delivery of pianos Total selling expenses Administrative expenses: Executive salaries Insurance Clerical Depreciation of office equipment Total administrative expenses Total selling and administrative expenses Net operating income Marwick's Pianos, Inc. Contribution Format Income Statement For the Month of August Total Per Piano Variable expenses Total variable expenses Contribution margin Faced expenses Total foxed expenses