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

Question

Cherokee Inc. is a merchandiser that provided the following information: Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases Amount 11,000 18 2 2 22,000 s 15,000 $ 10,000 23,000 87,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.

Explanation / Answer

1 Sales 198000 Cost of goods sold 74000 Gross margin 124000 Selling and administrative expenses: Selling expenses 44000 Administrative expenses 37000 81000 Net operating income 43000 2 Sales 198000 Variable expenses: Cost of goods sold 74000 Selling expenses 22000 Administrative expenses 22000 118000 Contribution margin 80000 Fixed expenses: Selling expenses 22000 Administrative expenses 15000 37000 Net operating income 43000

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