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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 $1,507 per

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 $1,507 per unit and then sells them to retail customers for an average price of $2,100 each. The companys selling and administrative costs for a typical month are presented below:

Costs Cost Formula
Selling:
Advertising $ 965 per month
Sales salaries and commissions $ 4,796 per month, plus 3% of sales
Delivery of pianos to customers $ 57 per piano sold
Utilities $ 643 per month
Depreciation of sales facilities $ 4,923 per month
Administrative:
Executive salaries $ 13,467 per month
Insurance $ 693 per month
Clerical $ 2,548 per month, plus $37 per piano sold
Depreciation of office equipment $ 934 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.

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