Todrick Company is a merchandiser that reported the following information based
ID: 2609698 • 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.
Sales $ 465,000 Beginning merchandise inventory $ 31,000 Purchases $ 310,000 Ending merchandise inventory $ 15,500 Fixed selling expense $ ? Fixed administrative expense $ 18,600 Variable selling expense $ 23,250 Variable administrative expense $ ? Contribution margin $ 93,000 Net operating income $ 27,900 Req 1 Req 2 Req 3 to 5 Req 6 Prepare a contribution format income statement. Todrick Company Contribution Format Income Statement Sales $465,000 Variable expenses: Cost of goods sold Selling expense Administrative expense $325,500 23,250 23,250 372,000 Fixed expenses: Selling expense Administrative expense $ 46,500 18,600 65,100 Net operating income $ 27,900Explanation / Answer
Since answer to Requirement 1& 2 are already provided in the question, the following answers are for the remaining parts:
3. Sales = $465,000
Number of units = 1,000
Selling price per unit = $465
4. Variable cost = $46,500
Number of units = 1,000
Variable cost per unit = $46.5
5. Contribution = $372,000
Number of units = 1,000
Contribution per unit = $372
6. Contribution format of income statement would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales. This is due to the fact that in Contribution format variable expenses are shown separately which will help the managers in estimating the changes in responses to changes in unit sales. As the unit changes the variable cost will change.