Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:
Sales $ 270,000 Beginning merchandise inventory $ 18,000 Purchases $ 180,000 Ending merchandise inventory $ 9,000 Fixed selling expense $ ? Fixed administrative expense $ 10,800 Variable selling expense $ 13,500 Variable administrative expense $ ? Contribution margin $ 54,000 Net operating income $ 16,200 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?
Traditional income statement Contribution income statement
Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:
| Sales | $ | 270,000 | |||||||
| Beginning merchandise inventory | $ | 18,000 | |||||||
| Purchases | $ | 180,000 | |||||||
| Ending merchandise inventory | $ | 9,000 | |||||||
| Fixed selling expense | $ | ? | |||||||
| Fixed administrative expense | $ | 10,800 | |||||||
| Variable selling expense | $ | 13,500 | |||||||
| Variable administrative expense | $ | ? | |||||||
| Contribution margin | $ | 54,000 | |||||||
| Net operating income | $ | 16,200 | |||||||
| 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?
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Related questions
Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:
| Sales | $ | 270,000 |
| Beginning merchandise inventory | $ | 18,000 |
| Purchases | $ | 180,000 |
| Ending merchandise inventory | $ | 9,000 |
| Fixed selling expense | $ | ? |
| Fixed administrative expense | $ | 10,800 |
| Variable selling expense | $ | 13,500 |
| Variable administrative expense | $ | ? |
| Contribution margin | $ | 54,000 |
| Net operating income | $ | 16,200 |
2. Prepare a traditional format income statement.
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Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:
| Sales | $ | 270,000 |
| Beginning merchandise inventory | $ | 18,000 |
| Purchases | $ | 180,000 |
| Ending merchandise inventory | $ | 9,000 |
| Fixed selling expense | $ | ? |
| Fixed administrative expense | $ | 10,800 |
| Variable selling expense | $ | 13,500 |
| Variable administrative expense | $ | ? |
| Contribution margin | $ | 54,000 |
| Net operating income | $ | 16,200 |
Required:
1. 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?
