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PROBLEM 1-19 Traditional and Contribution Format Income Statements L01-6 Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Required: Sales...... Beginning merchandise inventory. Purchases i Ending merchandise inventory Fixed selling expense Fixed administrative expense. Variable selling expense. Variable administrative expense 1. Prepare a contribution format income statement. 2. Prepare a traditional format income statement. 4. Contribution margin. Net operating income 3. Calculate the selling price per unit. $300,000 $20,000 $200,000 $7,000 ? $12,000 $15,000 ? $60,000 $18,000 Calculate the variable cost per unit. 5. Calculate the contribution margin per unit. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to in unit coles? Why?

PROBLEM 1-19 Traditional and Contribution Format Income Statements L01-6 Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Required: Sales...... Beginning merchandise inventory. Purchases i Ending merchandise inventory Fixed selling expense Fixed administrative expense. Variable selling expense. Variable administrative expense 1. Prepare a contribution format income statement. 2. Prepare a traditional format income statement. 4. Contribution margin. Net operating income 3. Calculate the selling price per unit. $300,000 $20,000 $200,000 $7,000 ? $12,000 $15,000 ? $60,000 $18,000 Calculate the variable cost per unit. 5. Calculate the contribution margin per unit. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to in unit coles? Why?

FINANCIAL ACCOUNTING
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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00 Chapter 1 PROBLEM 1-19 Traditional and Contribution Format Income Statements L01-6 Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales..... Beginning merchandise inventory. Purchases..... 1. 2. 3. 4. 5. 6. Ending merchandise inventory Fixed selling expense...... Fixed administrative expense. Variable selling expense. Variable administrative expense Contribution margin. Net operating income $300,000 $20,000 $200,000 $7,000 ? $12,000 $15,000 ? $60,000 $18,000 Required: Prepare a contribution format income statement. Prepare a traditional format income statement. Calculate the selling price per unit. Calculate the variable cost per unit. Calculate the contribution margin per unit. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales? Why?
Transcribed Image Text:00 Chapter 1 PROBLEM 1-19 Traditional and Contribution Format Income Statements L01-6 Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales..... Beginning merchandise inventory. Purchases..... 1. 2. 3. 4. 5. 6. Ending merchandise inventory Fixed selling expense...... Fixed administrative expense. Variable selling expense. Variable administrative expense Contribution margin. Net operating income $300,000 $20,000 $200,000 $7,000 ? $12,000 $15,000 ? $60,000 $18,000 Required: Prepare a contribution format income statement. Prepare a traditional format income statement. Calculate the selling price per unit. Calculate the variable cost per unit. Calculate the contribution margin per unit. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales? Why?
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A contribution margin income statement is an income statement in which all variable expenses are deducted from sales to arrive at a contribution margin. Then, all fixed expenses are subtracted to arrive at the net profit or net loss for the period. 

 

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