Exercise 1-6 Traditional and Contribution Format Income Statements [LO1-6] Chero

Question

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

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

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.

Complete this question by entering your answers in the tabs below.

Prepare a traditional income statement.

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Prepare a contribution format income statement.

Amount Number of units sold 11,000 Selling price per unit $ 16 Variable selling expense per unit $ 2 Variable administrative expense per unit $ 2 Total fixed selling expense $ 19,000 Total fixed administrative expense $ 15,000 Beginning merchandise inventory $ 12,000 Ending merchandise inventory $ 24,000 Merchandise purchases $ 88,000

Explanation / Answer

Traditional income statement :

Contribution format income statement :

Cherokee, Inc. Traditional Income Statement Sales $176,000 Cost of goods sold (76,000) Gross margin 100,000 Selling and administrative expenses: Administrative expenses (11000*2+15000) 37000 Selling expenses (11000*2+19000) 41000 Total Selling and administrative expense (78000) 0 Net operating income $22000

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