Sales (4,800 units × $269 per unit)
$1,291,200
Variable expenses:
Cost of goods sold (4,800 units × $114 per unit)
$547,200
Variable selling expense (4,800 units × $6 per unit)
28,800
Variable administrative expense (4,800 units × $14 per unit)
67,200
643,200
Contribution margin
648,000
Fixed expenses:
Fixed selling expense
38,100
Fixed administrative expense
59,900
98,000
Net operating income
$550,000
b. Traditional Format Income Statement
Sales (4,800 units × $269 per unit)
$1,291,200
Cost of goods sold (4,800 units × $114 per unit)
547,200
Gross margin
744,000
Selling and administrative expenses:
Selling expense ((4,800 units × $6 per unit) + $38,100)
$66,900
Administrative expense ((4,800 units × $14 per unit) + $59,900)
127,100
194,000
Net operating income
$550,000
Difficulty: 2 Medium
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
298) Wippert Corporation, a merchandising company, reported the following results for December:
Sales
$2,296,200
Cost of goods sold (all variable)
$997,600
Total variable selling expense
$86,000
Total fixed selling expense
$57,100
Total variable administrative expense
$43,000
Total fixed administrative expense
$148,100
Required:
a. Prepare a traditional format income statement for December.
b. Prepare a contribution format income statement for December.
Answer:
a. Traditional Format Income Statement
Sales
$2,296,200
Cost of goods sold
997,600
Gross margin
1,298,600
Selling and administrative expenses:
Selling expense
$143,100
Administrative expense
191,100
334,200
Net operating income
$964,400
b. Contribution Format Income Statement
Sales
$2,296,200
Variable expenses:
Cost of goods sold
$997,600
Variable selling expense
86,000
Variable administrative expense
43,000
1,126,600
Contribution margin
1,169,600
Fixed expenses:
Fixed selling expense
57,100
Fixed administrative expense
148,100
205,200
Net operating income
$964,400
Difficulty: 1 Easy
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
299) Bauman Sales Corporation, a merchandising company, reported total sales of $4,069,800 for November. The cost of goods sold (all variable) was $2,351,100, the total variable selling expense was $204,000, the total fixed selling expense was $117,700, the total variable administrative expense was $102,000, and the total fixed administrative expense was $267,000.
Required:
a. Prepare a contribution format income statement for November.
b. Prepare a traditional format income statement for November.
Answer:
a. Contribution Format Income Statement
Sales
$4,069,800
Variable expenses:
Cost of goods sold
$2,351,100
Variable selling expense