Milden Company is a merchandiser that plans to sell 25,000 units during the next
ID: 2521792 • Letter: M
Question
Milden Company is a merchandiser that plans to sell 25,000 units during the next quarter at a selling price of $52 per unit. The company also gathered the following cost estimates for the next quarter:
Required:
1. Prepare a contribution format income statement for the next quarter.
2. Prepare a traditional format income statement for the next quarter.
Prepare a contribution format income statement for the next quarter.
Cost Cost Formula Cost of good sold $22 per unit sold Advertising expense $172,000 per quarter Sales commissions 5% of sales Shipping expense $54,000 per quarter + $6.00 per unit sold Administrative salaries $82,000 per quarter Insurance expense $9,200 per quarter Depreciation expense $52,000 per quarterExplanation / Answer
Answers
Sales
[25000 units x $52]
$ 13,00,000.00
Less: Variable costs
Cost of Goods Sold
[25000 units x $22]
$ 5,50,000.00
Sales Commission
[25000 units x $52 x 5%]
$ 65,000.00
Shipping expenses
[25000 units x $6]
$ 1,50,000.00
Total Variable cost
$ 7,65,000.00
Contribution Margin
$ 5,35,000.00
Less: Fixed Costs
Advertising expense
$ 1,72,000.00
Shipping expenses
$ 54,000.00
Administrative salaries
$ 82,000.00
Insurance expense
$ 9,200.00
Depreciation expense
$ 52,000.00
Total Fixed Costs
$ 3,69,200.00
Net Income
$ 1,65,800.00
Workings for amount can be seen in Requirement 1
Milden Company
Traditional Format Income Statement
For the Next Quarter
Sales
$ 13,00,000.00
Cost of goods sold
$ 5,50,000.00
Gross margin
$ 7,50,000.00
Selling and administrative expenses:
Advertising expense
$ 1,72,000.00
Sales commission
$ 65,000.00
Shipping expense
$ 1,50,000.00
Administrative salaries
$ 82,000.00
Insurance expense
$ 9,200.00
Depreciation expense
$ 52,000.00
Shipping expense
$ 54,000.00
Total selling and administrative expenses
$ 5,84,200.00
Net operating income
$ 1,65,800.00
Sales
[25000 units x $52]
$ 13,00,000.00
Less: Variable costs
Cost of Goods Sold
[25000 units x $22]
$ 5,50,000.00
Sales Commission
[25000 units x $52 x 5%]
$ 65,000.00
Shipping expenses
[25000 units x $6]
$ 1,50,000.00
Total Variable cost
$ 7,65,000.00
Contribution Margin
$ 5,35,000.00
Less: Fixed Costs
Advertising expense
$ 1,72,000.00
Shipping expenses
$ 54,000.00
Administrative salaries
$ 82,000.00
Insurance expense
$ 9,200.00
Depreciation expense
$ 52,000.00
Total Fixed Costs
$ 3,69,200.00
Net Income
$ 1,65,800.00