Chapter 1, Problem 6E

EXERCISE 1—6 Traditional and Contribution Format Income Statements LO1—6

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.