Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells the
ID: 2499870 • Letter: M
Question
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,488 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $2,900 each. The selling and administrative costs that the company incurs in a typical month are presented below:
Prepare an income statement for Marwick’s Pianos, Inc., for August. Use the traditional format, with costs organized by function. (A "Net operating loss" should be entered as a negative number.)
Prepare an income statement for Marwick’s Pianos, Inc., for August, this time using the contribution format, with costs organized by behavior. 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.)
Costs Cost Formula Selling: Advertising $942 per month Sales salaries and commissions $4,799 per month, plus 3% of sales Delivery of pianos to customers $60 per piano sold Utilities $650 per month Depreciation of sales facilities $4,945 per month Administrative: Executive salaries $13,566 per month Insurance $685 per month Clerical $2,480 per month, plus $36 per piano sold Depreciation of office equipment $900 per month
Explanation / Answer
Answer for question no.1:
Refer to working note 1 below:
Answer for question no.2:
Refer to working note 2 below
Working notes:1
Bifurcatoin of costs:
Working notes 2:
Total fixed costs is as under:
Total variable costs per unit of sale:
Particulars Amount Remarks Sales revenue (A) 182700 63* 2900 (sales price) Minus: Cost of Pianos 93744 63*1488(purchase price per piano) Selling costs $20,597.00 fixed costs+no of units of sales*variable costs ie., $11,336+63*147 Adminstration costs $19,899.00 fixed costs+no of units of sales*variable costs ie., $17,631+63*36 Total costs (B) $134,240.00 Net profit C= A-B $48,460.00