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 $1,488 per unit and then sells them to retail customers for an average price of $2,700 each. The companys selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$	952 per month
Sales salaries and commissions	$	4,824 per month, plus 4% of sales
Delivery of pianos to customers	$	58 per piano sold
Utilities	$	662 per month
Depreciation of sales facilities	$	4,929 per month
Administrative:
Executive salaries	$	13,455 per month
Insurance	$	697 per month
Clerical	$	2,464 per month, plus $43 per piano sold
Depreciation of office equipment	$	903 per month

During August, Marwicks Pianos, Inc., sold and delivered 56 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.

repare a traditional format income statement for August. (A "Net operating loss" should be entered as a negative number.)

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	0
Administrative expenses:
Insurance
Executive salaries
Depreciation of office equipment
Clerical
Total administrative expenses	0
Total selling and administrative expenses		0
Net operating income		$

• 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. (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
  Variable expenses:
  Clerical
  Sales salaries and commissions
  Delivery of pianos
  Cost of goods sold
  Total variable expenses	0	0
  Contribution margin
  Fixed expenses:
  Advertising
  Depreciation of sales facilities
  Utilities
  Executive salaries
  Insurance
  Depreciation of office equipment
  Clerical
  Sales salaries and commissions
  Total fixed expenses	0
  Net operating income