1 answer

Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold 10,000...

Question:

Cherokee Inc. is a merchandiser that provided the following information:

Amount
Number of units sold 10,000
Selling price per unit $ 17
Variable selling expense per unit $ 2
Variable administrative expense per unit $ 2
Total fixed selling expense $ 22,000
Total fixed administrative expense $ 15,000
Beginning merchandise inventory $ 11,000
Ending merchandise inventory $ 25,000
Merchandise purchases $ 89,000

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.


Answers

Solution

CHEROKEE INC.
Traditional income statement
Sales   $   1,70,000.00
Cost of goods sold $      75,000.00
Gross profit $      95,000.00
Selling and administrative expenses
Selling expenses $      42,000.00*
Administrative expenses $      35,000.00**
Total selling and administrative cost $      77,000.00
Net operating income $      18,000.00

*(10000 x 2) +22000
**(10000 x 2)+15000

CHEROKEE INC.
Contribution margin income statement
for the month of June
Sales revenue $   1,70,000.00
Less: Variable costs
Cost of goods sold $      75,000.00
Selling expenses $      20,000.00
Administrative expenses $      20,000.00
Total Variable cost $   1,15,000.00
Contribution margin   $      55,000.00
Fixed costs
Selling expenses $      22,000.00
Administrative expenses $      15,000.00
Total Fixed cost $      37,000.00
Operating profit $      18,000.00

.

.

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