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# Problem 1-21 Traditional and Contribution Format Income Statements [LO1-6] Marwick’s Pianos, Inc., purchases pianos from a...

###### Question:

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

Marwick’s 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 company’s 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, Marwick’s 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

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