2-14 What is the difference between a contribution format income statement and a traditional format income statement?
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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?
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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