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Cherokee Inc

Accounting

Cherokee Inc. is a merchandiser that provided the following information: 
Amount 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. 
Complete this question by entering your answers in the tabs below. 
Required 1 
Required 2 
Prepare a contribution format income statement. 
Cherokee, Inc. 
Contribution Format Income Statement 
Variable expenses: 
Fixed expenses: 
T 
0 
0 
 

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1)    
Cherokee, Inc.    
Traditional Income statement
Sales   $600,000.00
Cost of Goods Sold   $160,000.00
Gross Margin   $440,000.00
Selling and Administrative Expense:    
Variable Administration Expense $40,000.00  
Fixed Administration Expense $30,000.00  
Variable Selling Expense $80,000.00  
Fixed Selling Expense $40,000.00  
    $190,000.00
Net Income   $250,000.00
     
Note 1: Cost of goods sold = 24000 + 180000 - 44000 = $160,000
Note 2: Variable administration expense = $4 * 20,000 = $80,000
Note 3: variable selling expense = $2 * 20000 = $40,000

 

2)    
Cherokee, Inc.    
Contribution Format Income statement
Sales   $600,000.00
Variable expnses:    
Cost of Goods Sold $160,000.00  
selling Expense $80,000.00  
Administration Expenses $40,000.00  
    $280,000.00
Contribution Margin   $320,000.00
Fixed Expenses:    
Selling Expense $40,000.00  
Administrative Expense $30,000.00  
    $70,000.00
Net Income   $250,000.00

 

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