Marwick\'s Pianos, Inc., purchases pianos from a large manufacturer for an avera
ID: 2606132 • Letter: M
Question
Marwick's Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1.505 per unit and then s customers for an average price of $2,500 each. The company's selling and administrative costs for a typical month are presented below Cost Formula Costs Selling: Advertising sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities $936 per month $4,819 per month, plus 4% of sales $58 per piano sold $630 per month $5,002 per month Administrative: Executive salaries Insurance Clerical Depreciation of office equipment $13,410 per month $685 per month $2,460 per month, plus $36 per piano sold $936 per month During August, Marwick's Pianos, Inc., sold and delivered 61 planos Required: a contibution format income statement for August, Show costs and revenues on both a total and a per unit basis down through contribution margin.Explanation / Answer
1.
Marwick’s Pianos, Inc.
Income Statement
For the Month of August
Sales (61 pianos × $2,500 per piano)...........
$152,500
Cost of goods sold
(61 pianos × $1,505 per piano).................
91,805
Gross margin.............................................
60,695
Selling and administrative expenses:
Selling expenses:
Advertising...........................................
$ 936
Sales salaries and commissions
[$4819 + (4% × $152,500)].................
10,919
Delivery of pianos
(61 pianos × $58 per piano).................
3,538
Utilities.................................................
630
Depreciation of sales facilities..................
5,002
Total selling expenses...............................
21,025
Administrative expenses:
Executive salaries..................................
13,410
Insurance.............................................
685
Clerical
[$2,460 + (61 pianos × $36 per piano)].
4,656
Depreciation of office equipment.............
936
Total administrative expenses....................
19,687
Total selling and administrative expenses......
40,712
Net operating income.................................
$19,983
Problem 5-11 (continued)
2.
Marwick’s Pianos, Inc.
Income Statement
For the Month of August
Total
Per
Piano
Sales (61 pianos × $2,500 per piano)..............
$152,500
$2,500
Variable expenses:
Cost of goods sold
(61 pianos × $1,505 per piano)..................
91,805
1,505
Sales commissions (4% × $152,500).............
6,100
100
Delivery of pianos (61 pianos × $58 per piano).....................................................
3,538
58
Clerical (61 pianos × $36 per piano)..............
1,830
36
Total variable expenses..................................
103,273
1,699
Contribution margin.......................................
49,227
$ 801
Fixed expenses:
Advertising.................................................
936
Sales salaries.............................................
4,819
Utilities......................................................
630
Depreciation of sales facilities.......................
5,002
Executive salaries.......................................
13,410
Insurance..................................................
685
Clerical......................................................
2,460
Depreciation of office equipment...................
936
Total fixed expenses......................................
29,244
Net operating income....................................
$ 19,983
1.
Marwick’s Pianos, Inc.
Income Statement
For the Month of August
Sales (61 pianos × $2,500 per piano)...........
$152,500
Cost of goods sold
(61 pianos × $1,505 per piano).................
91,805
Gross margin.............................................
60,695
Selling and administrative expenses:
Selling expenses:
Advertising...........................................
$ 936
Sales salaries and commissions
[$4819 + (4% × $152,500)].................
10,919
Delivery of pianos
(61 pianos × $58 per piano).................
3,538
Utilities.................................................
630
Depreciation of sales facilities..................
5,002
Total selling expenses...............................
21,025
Administrative expenses:
Executive salaries..................................
13,410
Insurance.............................................
685
Clerical
[$2,460 + (61 pianos × $36 per piano)].
4,656
Depreciation of office equipment.............
936
Total administrative expenses....................
19,687
Total selling and administrative expenses......
40,712
Net operating income.................................
$19,983