Marwick’s Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,496 per unit and then sells them to retail customers for an average price of $2,900 each. The company’s selling and administrative costs for a typical month are presented below:
Costs Cost Formula
Selling: Advertising $965 per month
Sales salaries and commissions $4,814 per month, plus 4% of sales
Delivery of pianos to customers $60 per piano sold
Utilities $655 per month
Depreciation of sales facilities $4,985 per month
Administrative: Executive salaries $13,501 per month
Insurance $705 per month
Clerical $2,477 per month, plus $35 per piano sold
Depreciation of office equipment $851 per month
During August, Marwick’s Pianos, Incorporated, sold and delivered 63 pianos.
Required:
1. Prepare a traditional format income statement for August.
2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.
