Exercise 1-6 (Algo) Traditional and Contribution Format Income Statements [LO1-6] Cherokee Inc. is a merchandiser that provided...

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Exercise 1-6 (Algo) Traditional and Contribution Format IncomeStatements [LO1-6]
Cherokee Inc. is a merchandiser that provided the followinginformation:
Amount
Number of units sold 13,000
Selling price per unit $ 17
Variable selling expense per unit $ 1
Variable administrative expense per unit $ 3
Total fixed selling expense $ 20,000
Total fixed administrative expense $ 16,000
Beginning merchandise inventory $ 9,000
Ending merchandise inventory $ 23,000
Merchandise purchases $ 87,000
Required:
1. Prepare a traditional income statement.
2. Prepare a contribution format income statement.

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Solution 1 Cherokee Inc Traditional Income Statement Sales 221000 Cost of goods sold 73000 Gross margin 148000 Selling and administrative expenses Administrative expenses 55000 Selling expenses 33000 88000 Net operating income 60000 Working Notes Cherokee Inc Traditional Income Statement Sales 221000 a No of units sold x selling price per unit 13000 x 17 Less See Answer

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		Amount
Number of units sold		13,000
Selling price per unit	$	17
Variable selling expense per unit	$	1
Variable administrative expense per unit	$	3
Total fixed selling expense	$	20,000
Total fixed administrative expense	$	16,000
Beginning merchandise inventory	$	9,000
Ending merchandise inventory	$	23,000
Merchandise purchases	$	87,000