Problem 1-21 Traditional and Contribution Format Income Statements [LO1-6]

Marwicks Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,488 per unit and then sells them to retail customers for an average price of $2,700 each. The companys selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$	952 per month
Sales salaries and commissions	$	4,824 per month, plus 4% of sales
Delivery of pianos to customers	$	58 per piano sold
Utilities	$	662 per month
Depreciation of sales facilities	$	4,929 per month
Administrative:
Executive salaries	$	13,455 per month
Insurance	$	697 per month
Clerical	$	2,464 per month, plus $43 per piano sold
Depreciation of office equipment	$	903 per month

During August, Marwicks Pianos, Inc., sold and delivered 56 pianos.

Required:

1. Prepare a traditional format income statement for August. 2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.

repare a traditional format income statement for August. (A "Net operating loss" should be entered as a negative number.)

Marwick's Pianos, Inc. Traditional Income Statement For the Month of August Sales $ Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses: Advertising Sales salaries and commissions Utilities Depreciation of sales facilities Delivery of pianos Total selling expenses 0 Administrative expenses: Insurance Executive salaries Depreciation of office equipment Clerical Total administrative expenses 0 Total selling and administrative expenses 0 Net operating income $

• Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin. (A "Net operating loss" should be entered as a negative number.)

  Marwick's Pianos, Inc. Contribution Format Income Statement For the Month of August Total Per Piano Sales Variable expenses: Clerical Sales salaries and commissions Delivery of pianos Cost of goods sold Total variable expenses 0 0 Contribution margin Fixed expenses: Advertising Depreciation of sales facilities Utilities Executive salaries Insurance Depreciation of office equipment Clerical Sales salaries and commissions Total fixed expenses 0 Net operating income