Cherokee Manufacturing Company established the following standard price and cost data: Sales price $ 12.00 per unit Variable manufacturing cost $ 7.20 per unit Fixed manufacturing cost $ 3,600 total Fixed selling and administrative cost $ 1,200 total Cherokee planned to produce and sell 2,000 units. Actual production and sales amounted to 2,200 units. Required Prepare the pro forma income statement in contribution format that would appear in a master budget. Prepare the pro forma income statement in contribution format that would appear in a flexible budget.

A report is termed as the financial statement which shows the costs and revenues that are incurred by a firm. It also displays if a business is profitable or losing money over a given accounting period.

The financial statements, together with the pro forma financial statement, aids in the understanding of your company’s liquidity.

Pro forma income statement in contribution format

Sales[tex]( 2,200 \:units \times \$ 12.00)[/tex] 26,400

Less Variable Costs :

Variable manufacturing cost [tex]( 2,200 \:units \times \$ 7.20)[/tex] (15,840)

Contribution 10,560

Less: Expenses :

Fixed manufacturing cost (3,600)

Fixed selling and administrative cost (1,200)

Net Income 5,760

Therefore the net income is $5760

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