Question: Exercise, Traditional and Contribution Format Income Statements [LO1-6] Cherokee Inc. is a merchandiser that provided the following information: Number of units sold 14,000 Selling price per unit $ 16 Variable selling expense per unit $ 2 Variable administrative expense per unit $ 2 Total fixed selling expense $ 18,000 Total fixed administrative expense $ 16,000 Beginning merchandise inventory $ 11,000 Ending merchandise inventory $ 23,000 Merchandise purchases $ 85,000 Required:
1. Prepare a traditional income statement.
2. Prepare a contribution format income statement.
Exercise: Traditional and Contribution Format Income Statements.
Cherokee Inc. is a merchandiser that provided the following information:
| Number of units sold |
|
14,000 |
| Selling price per unit |
$ |
16 |
| Variable selling expense per unit |
$ |
2 |
| Variable administrative expense per unit |
$ |
2 |
| Total fixed selling expense |
$ |
18,000 |
| Total fixed administrative expense |
$ |
16,000 |
| Beginning merchandise inventory |
$ |
11,000 |
| Ending merchandise inventory |
$ |
23,000 |
| Merchandise purchases |
$ |
85,000 |
Required: 1. Prepare a traditional income statement.
| Cherokee, Inc. |
| Traditional Income Statement |
| Sales |
|
$224,000 |
| Cost of goods sold |
|
73,000 |
| Gross margin |
|
151,000 |
| Selling and administrative expenses: |
|
|
| Selling expenses |
46,000 |
|
| Administrative expenses |
|
|
| Net operating income |
|
|
2. Prepare a contribution format income statement
| Cherokee, Inc. |
| Contribution Format Income Statement |
| Variable expenses: |
|
0 |
| Fixed expenses: |
|
0 |