ACCT208 Lecture Notes - Lecture 2: Income Statement, Fixed Cost, Extended Periodic Table
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Problem 1-19 Traditional and Contribution Format IncomeStatements [LO1-6]
Todrick Company is a merchandiser that reported the followinginformation based on 1,000 units sold:
Sales | $ | 285,000 |
Beginning merchandise inventory | $ | 19,000 |
Purchases | $ | 190,000 |
Ending merchandise inventory | $ | 9,500 |
Fixed selling expense | $ | ? |
Fixed administrative expense | $ | 11,400 |
Variable selling expense | $ | 14,250 |
Variable administrative expense | $ | ? |
Contribution margin | $ | 57,000 |
Net operating income | $ | 17,100 |
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 orcontribution format) would be more useful to managers in estimatinghow net operating income will change in responses to changes inunit sales?
Prepare a contribution format income statement.
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Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:
Sales | $ | 360,000 |
Beginning merchandise inventory | $ | 24,000 |
Purchases | $ | 240,000 |
Ending merchandise inventory | $ | 12,000 |
Fixed selling expense | $ | ? |
Fixed administrative expense | $ | 14,400 |
Variable selling expense | $ | 18,000 |
Variable administrative expense | $ | ? |
Contribution margin | $ | 72,000 |
Net operating income | $ | 21,600 |
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?
Your Company manufactures and sells one product. The sellingprice per unit is $80 per unit. The following pertains to thecompany's first year of operations in which it produced 40,000 andsold 35,000 units.
Variable costs: | |
Manufacturing: | |
Direct materials | 960,000 |
Direct labor | 560,000 |
Variable manufacturing overhead | 80,000 |
Variable selling | 140,000 |
Fixed Costs per year: | |
Fixed manufacturing | 840,000 |
Fixed selling and administrative | 490,000 |
Instructions: | |
1.Using the above information prepare | |
an income statement in the traditional | |
format. | |
2. Prepare an income statement in the | |
contribution format. | |
3. Compute the unit cost under absorption costing. | |
4. Compute the unit cost under variable costing. | |
5. Compute the contribution margin per unit. | |
6. Compute the contribution margin ratio | |
7. There is a difference in the net income using one | |
statement versus the other; explain the | |
cause of the difference? | |
8. Compute the breakeven sales in units 9. Compute the breakeven sales dollars. |