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Honest Donald's Auto Dealer purchase used cars at auto auctions and sells them retail. The...

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Accounting

Honest Donald's Auto Dealer purchase used cars at auto auctions and sells them retail. The autos, on average, sell for approximately $17,500 each and Donald $11,500. The costs that the company incurs in a typical month are listed below:

COSTS COST FORMULA
Selling:
Advertising $2,400 per month
preparation of autos for delivery $250 per auto sold
sales salaries & commissions $4,200 per month, plus 8% of sales
Utilities $3,500 per month
Depreciation on sales facility $4,200 per month
Administrative:
executive salaries $13,000 per month
depreciation on office equipment $2,000 per month
clerical $3,000 per month
insurance $1,200 per month

During July, Honest Donald's sold 50 autos.

1. Prepare a traditional income statement for July

2. Prepare a contribution format income statement for July. Show costs and revenues on both atotal and per unit basis dowm through contribution margin.

3. why might it be misleading to show the fixed costs on per unit basis on statement for part 2

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