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 $1,483 per unit and then sells them to retail customers for an average price of $2,300 each. The companys selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$	943 per month
Sales salaries and commissions	$	4,807 per month, plus 3% of sales
Delivery of pianos to customers	$	59 per piano sold
Utilities	$	657 per month
Depreciation of sales facilities	$	4,962 per month
Administrative:
Executive salaries	$	13,504 per month
Insurance	$	697 per month
Clerical	$	2,500 per month, plus $37 per piano sold
Depreciation of office equipment	$	897 per month

During August, Marwicks Pianos, Inc., sold and delivered 57 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.

Marwick's Pianos, Inc. Traditional Income Statement For the Month of August Sales $131,100 Cost of goods sold 84,531 Gross margin 46,569 Selling and administrative expenses: Selling expenses: Administrative expenses $943 Sales salaries and commissions 1,051 Delivery of pianos 3,363 Utilities 657 Depreciation of sales facilities 4,962 Total selling expenses 10,976 Administrative expenses: Executive salaries 13,504 Insurance 697 Clerical 2,500 Depreciation of office equipment 897 Total administrative expenses 17,598 Total selling and administrative expenses 28,574 Net operating income $10,976

• 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 $131,100 $2,300 Variable expenses: Sales salaries and commissions Delivery of pianos Clerical Cost of goods sold Total variable expenses 0 0 Contribution margin Fixed expenses: Total fixed expenses 0