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 $1,483 per unit and then sells them to retail customers for an average price of $2,300 each. The companys selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$	943 per month
Sales salaries and commissions	$	4,807 per month, plus 3% of sales
Delivery of pianos to customers	$	59 per piano sold
Utilities	$	657 per month
Depreciation of sales facilities	$	4,962 per month
Administrative:
Executive salaries	$	13,504 per month
Insurance	$	697 per month
Clerical	$	2,500 per month, plus $37 per piano sold
Depreciation of office equipment	$	897 per month

During August, Marwicks Pianos, Inc., sold and delivered 57 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		$131,100
Cost of goods sold		84,531
Gross margin		46,569
Selling and administrative expenses:
Selling expenses:
Administrative expenses	$943
Sales salaries and commissions	1,051
Delivery of pianos	3,363
Utilities	657
Depreciation of sales facilities	4,962
Total selling expenses	10,976
Administrative expenses:
Executive salaries	13,504
Insurance	697
Clerical	2,500
Depreciation of office equipment	897
Total administrative expenses	17,598
Total selling and administrative expenses		28,574
Net operating income		$10,976

• down through contribution margin. (A "Net operating loss" should be entered as a negative number.)

  Marwick's Pianos, Inc.
  Contribution Format Income Statement
  For the Month of August
  	Total	Per Piano
  Sales	$131,100	$2,300
  Variable expenses:
  Sales salaries and commissions
  Delivery of pianos
  Clerical
  Cost of goods sold
  Total variable expenses	0	0
  Contribution margin
  Fixed expenses:
  Total fixed expenses	0