Todrick Company is a merchandiser that reported the following information based

Question

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: $ 210,000 $ 14,000 $140,000 $ 7,000 Sales Beginning merchandise inventory Purchases Ending merchandise inventory Fixed selling expense Fixed administrative expense Variable selling expense Variable administrative expense Contribution margin Net operating income $ 8,400 $ 10,500 $ 42,000 $ 12,600 Required: 1. Prepare a contribution format income statement. 2. Prepare a traditional format income statement. 3. Calculate the selling price per unit. 4. Calculate the variable cost per unit. 5. Calculate the contribution margin per unit. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales?

Explanation / Answer

selling price per unit = sales/no of units sold

= $ 210000/1000

= $ 210

variable cost = sales - contribution margin

= $210000 - $42000

= $168000

variable cost per unit = variable cost/ total quantity sold

= $168000/1000

= $168 p.u.

CONTRIBUTION MARGIN PER UNIT = CONTRIBUTION/NO OF UNITS SOLD

= $42000/1000

= $42

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