Cherokee Inc. is a merchandiser that provided the following information: Amount
ID: 2516308 • Letter: C
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
Answer:
1
Chirokee, Inc.
Traditional Income Statement
Sales (20,000*30)
600000
Cost of goods sold
160000
Gross margin
440000
Selling and administrative expenses:
Selling expenses
120000
Administrative expenses
70000
190000
Net operating income
250000
Working
1
Cost of goods sold
=24000+180,000-44000
=160,000
Selling expenses:
= (($4 per unit × 20,000 units) + $40,000)
= $120,000
Administrative expenses
= (($2 per unit × 20,000 units) + $30,000)
=$70,000
_____________________________________________________
2
Chirokee Inc.
Contribution Format Income Statement
Sales (20,000*30)
600000
Variable expenses:
Cost of goods sold
160000
Selling expenses
80000
Administrative expenses
40000
280000
Contribution margin
320000
Fixed expenses:
Selling expenses
40,000
Administrative expenses
30,000
70,000
Net operating income
250,000
Working notes
Selling expenses:
= (($4 per unit × 20,000 units)
= $80,000
Administrative expenses
= (($2 per unit × 20,000 units)
=$40,000
Chirokee, Inc.
Traditional Income Statement
Sales (20,000*30)
600000
Cost of goods sold
160000
Gross margin
440000
Selling and administrative expenses:
Selling expenses
120000
Administrative expenses
70000
190000
Net operating income
250000
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