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Cherokee Inc
Cherokee Inc. is a merchandiser that provided the following information:
| Amount | ||
| Number of units sold | 13,000 | |
| Selling price per unit | $ | 16 |
| Variable selling expense per unit | $ | 2 |
| Variable administrative expense per unit | $ | 3 |
| Total fixed selling expense | $ | 21,000 |
| Total fixed administrative expense | $ | 14,000 |
| Beginning merchandise inventory | $ | 9,000 |
| Ending merchandise inventory | $ | 23,000 |
| Merchandise purchases | $ | 86,000 |
Required:
1. Prepare a traditional income statement.
2. Prepare a contribution format income statement.
6 Cherokee Inc. is a merchandiser that provided the following information Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases 13,000 15 2 3 $ 19,000 $ 16,000 $ 12,000 $ 25,000 $ 86,000 Required: 1. Prepare a traditional income statement. Cherokee, Inc. Traditional Income Statement Selling and administrative expenses
Expert Solution
1.
| Cherokee, Inc. | ||
| Traditional format Income Statement | ||
| Sales (13000*$16) | $2,08,000 | |
| Less: Cost Of Goods sold (9000+86000-23000) | $72,000 | |
| Gross Profit | $1,36,000 | |
| Selling and Administrative Expenses: | ||
| Variable Selling Expenses | $26,000 | |
| Variable Administrative Expenses | $39,000 | |
| Fixed Selling Expenses | $21,000 | |
| Fixed Administrative Expenses | $14,000 | |
| Total expenses | $1,00,000 | |
| Net Operating Income | $36,000 |
2.
| Cherokee, Inc. | ||
| Contribution format Income Statement | ||
| Sales (13000*$16) | $2,08,000 | |
| Variable Expenses: | ||
| Coat of goods sold (9000+86000-23000) | $72,000 | |
| Variable Selling Expenses | $26,000 | |
| Variable Administrative Expenses | $39,000 | |
| Total Variable Expenses | $1,37,000 | |
| Contribution Margin | $71,000 | |
| Fixed Expenses: | ||
| Fixed Selling Expenses | $21,000 | |
| Fixed Administrative Expenses | $14,000 | |
| Total Fixed Expenses | $35,000 | |
| Net Operating Income | $36,000 |
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