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

Question

Cherokee Inc. is a merchandiser that provided the following information: Amount 20,000 30 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 $40,000 $ 30,000 $ 24,000 44,000 $180,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.

Explanation / Answer

  Traditional income statment

Note:- Cost of goods sold = Beginning merchandise inventory + Merchandise Purchase - Ending merchandise inventory

sales (20000 * $30) 600000 cost of goods sold [24000 + 180000 - 44000] 160000 Gross margin 440000 selling and administrative expenses: selling expense [($4 * 20000)+ $40000] 120000 Administrative [($2 * 20000)+ $30000] 70000 190000    net operating income $250000

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