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Exercise 1-6 (Algo) Traditional and Contribution Format Income Statements [LO1-6] Cherokee Incorporated is a merchandiser that provided the following information: Amount Number of units sold 12,000 Selling price per unit $ 17 Variable selling expense per unit $ 1 Variable administrative expense per unit $ 2 Total fixed selling expense $ 21,000 Total fixed administrative expense $ 13,000 Beginning merchandise inventory $ 11,000 Ending merchandise inventory $ 22,000 Merchandise purchases $ 89,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.

Sagot :

Answer:

The net operating income is $56,000

Explanation:

1. The traditional imcome statement:

2. The contribution format income statement:

Working Note:

[tex]\\\text{Sale revenue}=12,000*\$17=\$204,000\\\text{Variable selling expense}=12,000*\$1=\$12,000\\\text{Variable administrative expense}=12,000*\$2=\$24,000\\\text{Cost of goods sold}&=\text{Beginning merchandise inventory}+\text{Merchandise purchase}-\text{Ending merchandise Inventory}\\&=\$11,000+\$89,000-\$22,000\\&=\$78,000\\\text{Selling expense}=\$12,000+\$21,000=\$33,000\\\text{Administrative expense}=\$24,000+\$13,000=\$37,000[/tex]

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