Cherokee Inc
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Cherokee Inc. is a merchandiser that provided the following information: Number of units sold 20,000 Selling price per unit $ 30 Variable selling expense per unit $ 4 Variable administrative expense per unit $ 2 Total fixed selling expense $ 40,000 Total fixed administrative expense $ 30,000 Beginning merchandise inventory $ 24,000 Ending merchandise inventory $ 44,000 Merchandise purchases $ 180,000 Required
1) Prepare a traditional income statement.
| 2 )Prepare a contribution format income statement. |
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| Cherokee Inc | ||
| Traditional Income Statement | ||
| Sales | 20000*30 | 600000 |
| Cost of goods sold | 24000+180000-44000 | 160000 |
| Gross margin | 440000 | |
| Selling and administrative expenses: | ||
| Selling expenses | (4*20000)+40000 | 120000 |
| Administrative expenses | (2*20000)+30000 | 70000 |
| Net operating income | 250000 | |
| Cherokee Inc | ||
| Contribution Format Income Statement | ||
| Sales | 600000 | |
| Variable expenses: | ||
| Cost of goods sold | 160000 | |
| Selling expenses 20000*4 |
80000 | |
| Administrative expenses 2*20000 |
40000 | 280000 |
| Contribution margin | 320000 | |
| Fixed expenses: | ||
| Selling expenses | 40000 | |
| Administrative expenses | 30000 | 70000 |
| Net operating income | 250000 | |
