Answer:
1. a contribution format income statement
Sales $ 360,000
Less Cost of Sales (Variable Cost)
Opening Merchandise Inventory $ 24,000
Add Purchases $ 240,000
Less Closing Inventory ($ 12,000) ($ 252,000)
Less Variable Selling Expense ($ 18,000)
Less Variable administrative expense (18,000) ($288,000)
Contribution $ 72,000
Less Fixed Expenses ;
Fixed selling expense ($36,000)
Fixed administrative expense ($ 14,400) (50,400)
Net Operating Income $ 21,600
2. a traditional format income statement.
Sales $ 360,000
Less Cost of Sales (Variable Cost)
Opening Merchandise Inventory $ 24,000
Add Purchases $ 240,000
Less Closing Inventory ($ 12,000) ($ 252,000)
Gross Profit $ 108,000
Less Expenses ;
Selling Expenses
Variable Selling Expense ($ 18,000)
Fixed selling expense ($36,000)
Administrative Expenses
Variable administrative expense (18,000)
Fixed administrative expense ($ 14,400) (86,400)
Net Operating Income $ 21,600
3. $ 360
4. $288
5. $72
6. contribution format
Explanation:
Selling price per unit = Total Sales Revenue / Units Sold
= $ 360,000 / 1,000 units
= $ 360
variable cost per unit = Total Variable Cost / units sold
= $288,000 / 1,000 units
= $288
contribution margin per unit = Selling price per unit - variable cost per unit
= $ 360 - $288
= $72
Contribution format is more useful to managers because its shows separately the changes in variable costs and contribution with any change in units sales
