Situation 1Honest Andrea’s Auto Dealer purchases used cars at auto auctionsand sells them retail....Situation...

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Accounting

Situation 1
Honest Andrea’s Auto Dealer purchases used cars at auto auctionsand sells them retail. The autos, on average, sell forapproximately $20,000 each and cost Andrea $13,000. The costs thatthe company incurs in a typical month are listed below:
Costs                                                                                 CostFormula
Selling:
     Advertising                                                                $3,800 per month
      Preparation of Autos forDelivery                             $    750 per auto sold
      Sales salaries &commissions                                     $4,500 per month, plus 7% of sales
     Utilities                                                                      $5,200 per month
      Depreciation on sales facility                                    $4,500 per month
Administrative:
      Executivesalaries                                                       $14,000 per month
      Depreciation on officeequipment                             $2,200 per month
      Clerical staffsalaries                                                  $3,500 per month
     Insurance                                                                    $1,800 per month
During April, Honest Andrea’s sold 65 autos.
Required
Prepare a traditional income statement as of April 30. Allnumbers should be rounded to the nearest dollar.
Prepare a contribution format income statement as of April 30.All numbers should be rounded to the nearest dollar. Show costs andrevenues on both a totaland per unit basis down through thecontribution margin.
What costs does the Contribution Margin Income Statement formatisolate (make apparent) that the Traditional Income Statementformat does not?
For the statement you prepared for Part 2, why might it bemisleading to show the fixed costs on a per unit basis?

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1 Prepare a traditional income statement as of April 30 In Sales 6520000 1300000 Less Cost of Goods sold 6513000 845000 Gross Margin 455000 Selling and Administrative Expenses Advertising 3800 Preparation of Autos for delivery 75065 48750 Sales salaries 4500 Sales commissions 13000007 91000 Utilities 5200 Depreciation on Sales facility 4500 Total Selling Expense See Answer

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In: AccountingSituation 1Honest Andrea’s Auto Dealer purchases used cars at auto auctionsand sells them retail....Situation 1Honest Andrea’s Auto Dealer purchases used cars at auto auctionsand sells them retail. The autos, on average, sell forapproximately $20,000 each and cost Andrea $13,000. The costs thatthe company incurs in a typical month are listed below:Costs CostFormulaSelling: Advertising $3,800 per month Preparation of Autos forDelivery $ 750 per auto sold Sales salaries &commissions $4,500 per month, plus 7% of sales Utilities $5,200 per month Depreciation on sales facility $4,500 per monthAdministrative: Executivesalaries $14,000 per month Depreciation on officeequipment $2,200 per month Clerical staffsalaries $3,500 per month Insurance $1,800 per monthDuring April, Honest Andrea’s sold 65 autos.RequiredPrepare a traditional income statement as of April 30. Allnumbers should be rounded to the nearest dollar.Prepare a contribution format income statement as of April 30.All numbers should be rounded to the nearest dollar. Show costs andrevenues on both a totaland per unit basis down through thecontribution margin.What costs does the Contribution Margin Income Statement formatisolate (make apparent) that the Traditional Income Statementformat does not?For the statement you prepared for Part 2, why might it bemisleading to show the fixed costs on a per unit basis?