Marwick’s Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,481 per unit and then sells them to retail customers for an average price of $3,200 each. The company’s selling and administrative costs for a typical month are presented below: CostsCost FormulaSelling: Advertising$965 per monthSales salaries and commissions$4,808 per month, plus 4% of salesDelivery of pianos to customers$58 per piano soldUtilities$636 per monthDepreciation of sales facilities$4,979 per monthAdministrative: Executive salaries$13,481 per monthInsurance$709 per monthClerical$2,529 per month, plus $44 per piano soldDepreciation of office equipment$932 per month During August, Marwick’s Pianos, Incorporated, sold and delivered 62 pianos. Required:1. Prepare a traditional format income statement for August.2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.

The income statement indicates the earning of the particular business in an accounting period. It…

Answered: Marwick’s Pianos, Incorporated,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Marwick’s Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,481 per unit and then sells them to retail customers for an average price of $3,200 each. The company’s selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$965 per month
Sales salaries and commissions	$4,808 per month, plus 4% of sales
Delivery of pianos to customers	$58 per piano sold
Utilities	$636 per month
Depreciation of sales facilities	$4,979 per month
Administrative:
Executive salaries	$13,481 per month
Insurance	$709 per month
Clerical	$2,529 per month, plus $44 per piano sold
Depreciation of office equipment	$932 per month

During August, Marwick’s Pianos, Incorporated, sold and delivered 62 pianos.

Required:

1. Prepare a traditional format income statement for August.
2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.

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