Cherokee Inc. is a merchandiser that provided the following information Required: Prepare a traditional income statement. Prepare a contribution format income statement.
1. Traditional Income Sttement
Sales (20,000X30) 600000
Cost of goods sold (24,000+180,000-44,000) (160,000)
Gross margin 440,000
Selling and administration expenses:
Selling expenses ( 20,000X4)+ 40,000 120,000
administrative expenses (20,000X2)+30,000 70,000 (190,000)
Net operating income 250,000
2. contribution format income statement
sales (20,000X30) 600,000
variable expenses:
cost of goods sold(24,000+180,000-44,000) (160,000)
selling expenses ( 20,000X4) (80,000) administrative expenses (20,000X2) (40,000)
————–
contribution margin 320,000
Fixed expenses:
selling expenses 40,000
Administrative expenses 30,000 (70,000)
Net operating income 250,000
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