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17 Mar 2018
PROBLEM 2-19 Contribution Format versus Traditional Income Statement [LO2-6] Marwick's Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $2,450 each from the manufacturer. Marwick's Pianos, Inc., sells the pianos to its customers at an average price of $3,125 each. The selling and administrative costs that the company incurs in a typical month are presented below: Costs Cost Formula Selling Advertising ........ Sales salaries and commissions ... Delivery of pianos to customers .... Utilities ....... Depreciation of sales facilities ..... Administrative: Executive salaries .............. Insurance ... Clerical .. Depreciation of office equipment...... $700 per month $950 per month, plus 8% of sales $30 per piano sold $350 per month $800 per month $2,500 per month $400 per month $1,000 per month, plus $20 per piano sold $300 per month During August, Marwick's Pianos, Inc., sold and delivered 40 pianos. Required: 1. Prepare an income statement for Marwick's Pianos, Inc., for August. Use the traditional for- mat, with costs organized by function. 2. Redo (1) above, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin. 3. Refer to the income statement you prepared in (2) above. Why might it be misleading to show the fixed costs on a per unit basis?
PROBLEM 2-19 Contribution Format versus Traditional Income Statement [LO2-6] Marwick's Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $2,450 each from the manufacturer. Marwick's Pianos, Inc., sells the pianos to its customers at an average price of $3,125 each. The selling and administrative costs that the company incurs in a typical month are presented below: Costs Cost Formula Selling Advertising ........ Sales salaries and commissions ... Delivery of pianos to customers .... Utilities ....... Depreciation of sales facilities ..... Administrative: Executive salaries .............. Insurance ... Clerical .. Depreciation of office equipment...... $700 per month $950 per month, plus 8% of sales $30 per piano sold $350 per month $800 per month $2,500 per month $400 per month $1,000 per month, plus $20 per piano sold $300 per month During August, Marwick's Pianos, Inc., sold and delivered 40 pianos. Required: 1. Prepare an income statement for Marwick's Pianos, Inc., for August. Use the traditional for- mat, with costs organized by function. 2. Redo (1) above, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin. 3. Refer to the income statement you prepared in (2) above. Why might it be misleading to show the fixed costs on a per unit basis?
17 Jan 2023
Tod ThielLv2
18 Mar 2018
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