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Cherokee Inc
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:
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Expert Solution
| 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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