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Question

Cherokee Inc. is a merchandiser that provided the following information: 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.

 

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Tommy

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Step 1/2

Preparation of traditional income statement

Explanation:

Refer below table for calculations. In a traditional income statement, we first calculate the gross margin and then the net operating income as shown below

Step 2/2

Preparation of contribution format income statement

Explanation:

Refer below table for calculation. Cost of goods sold is same as traditional income statement, hence the calculation is not shown again. In a contribution format income statement, we first calculate the contribution margin and then the net operating income as shown below

Final Answer

The income statements are prepared as per requirement.

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