Purchase Solution

Contribution Format versus Traditional Income Statement

Not what you're looking for?

Ask Custom Question

Marwick's Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $2,450 each from the manufacturer. Marwick's Pianos, Inc., sells the pianos to its customers at an average price of $3,125 each. The selling and administrative costs that the company incurs in a typical month are presented below:

Costs Cost Formula
Selling:
Advertising $700 per month
Sales salaries and commissions $950 per month, plus 8 percent of sales
Delivery of pianos to customers $30 per piano sold
Utilities $350 per month
Depreciation of sales facilities $800 per month

Administrative:
Executive salaries $2,500 per month
Insurance $400 per month
Clerical $1,000 per month, plus $20 per piano sold
Depreciation of office equipment $300 per month

During August, Marwick's Pianos, Inc., sold and delivered 40 pianos.

Required:

1. Prepare an income statement for Marwick's Pianos, Inc., for August. Use the traditional format, with costs organized by function.

2. Redo (1) above, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin.

3. Refer to the income statement you prepared in (2) above. Why might it be misleading to show the fixed costs on a per unit basis?

Purchase this Solution
Purchase this Solution
Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

Operations Management

This quiz tests a student's knowledge about Operations Management

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

View More Free Quizzes
Related BrainMass Solutions

  • Success Manufacturing Contribution margin Income Statement

    Prepare a) contribution margin income statement, and b) an income statement. b.

  • Powerpoint presentation on the topic of costing

    -describing the steps needed to create a contribution format income statement -need to include at least 1 data slide and examples of a traditional format income statement and the equivalent contribution format based on the data slide used -need to

  • National Linen Contribution Margin uses and statement

    Tutorial: A contribution margin income statement sorts expenses by their behavior, either variable or fixed. A traditional income statement sorts by product or nonproduct.

  • contribution format vs traditional income statement

    Summarize what a contribution format income statement depicts, as compared to the traditional format. The contribution margin format reorganizes expenses.

  • Fixed vs. variable costs

    Summarize what a contribution format income statement depicts, as compared to the traditional format. Using the following company data, show how the two income statement formats would look side by side.

  • Haaki Shop, Inc. traditional & contribution margin format

    452755 Haaki Shop, Inc. traditional & contribution format income statement Haaki Shop, Inc., is a large retailer of surfboards.

  • P12.20 contribution margin income statement unit changes

    559487 P12.20 contribution margin format income statement unit changes Contribution margin format income statement "what-if" questions P12.20 Prepare a traditional income statement and a contribution margin format income statement (and contribution

  • Hughes Satellite Corp. Variable costing

    Your tutorial creates a traditional income statement (absorption costing) and a contribution margin income statement (variable costing) as well as showing how the cost per unit is determined. The applied versus actual fixed overhead is analyzed.

  • Cont Marg Inc Stmt and Sens Analysis

    521384 Contribution Margin Income Statement and Sensitivity Analysis P12-14 Prepare a contribution margin format income statement; answer what-if questions [LO 7, 8, 9, 12] (See the attachment for the income statement in the traditional format)

View More Related Solutions