Todrick Company is a merchandiser that reported the following information based
ID: 2413596 • Letter: T
Question
Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:
Required:
1. Prepare a contribution format income statement.
2. Prepare a traditional format income statement.
3. Calculate the selling price per unit.
4. Calculate the variable cost per unit.
5. Calculate the contribution margin per unit.
6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales?
Sales $ 360,000 Beginning merchandise inventory $ 24,000 Purchases $ 240,000 Ending merchandise inventory $ 12,000 Fixed selling expense $ ? Fixed administrative expense $ 14,400 Variable selling expense $ 18,000 Variable administrative expense $ ? Contribution margin $ 72,000 Net operating income $ 21,600Explanation / Answer
Beginning inventory 24000 Add Purchases 240000 Cost of goods available for sale 264000 Less Ending inventory 12000 Cost of goods sold 252000 Amount Per unit 1 Sales 360000 360 Variable expense Cost of goods sold 252000 Variable selling expense 18000 Variable administrative 18000 Total variable expense 288000 288 Contribution margin 72000 72 Fixed expense Fixed selling expense 14400 Fixed administrative expense 36000 Total fixed expense 50400 Net operating income 21600 2 Traditional income statement Net sales 360000 Cost of goods sold 252000 Gross profit 108000 Operating expense Variable selling expense 18000 Variable administrative 18000 Fixed selling expense 14400 Fixed administrative expense 36000 86400 Net operating income 21600 3 Selling price per unit 360 (360000/1000) 4 Variable cost per unit 288 (288000/1000) 5 Contribution margin per unit 72 72000/1000