Question

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $2,450 per unit and then sells them to retail customers for an average price of $3,125 each. The company’s selling and administrative costs for a typical month are presented below: Costs Cost Formula Selling: Advertising $ 700 per month Sales salaries and commissions $ 950 per month, plus 8% of sales Delivery of pianos to customers $ 30 per piano sold Utilities $ 350 per month Depreciation of sales facilities $ 800 per month Administrative: Executive salaries $ 2,500 per month Insurance $ 400 per month Clerical $ 1,000 per month, plus $20 per piano sold Depreciation of office equipment $ 300 per month During August, Marwick’s Pianos, Inc., sold and delivered 40 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.

Answer 1