Milden Company is a merchandiser that plans to sell 37,000 units during the next quarter at a selling price of $55 per unit. The company also gathered the following cost estimates for the next quarter:

Milden Company is a merchandiser that plans to sell 37,000 units during the next quarter at a selling price of $55 per unit. The company also gathered the following cost estimates for the next quarter:

Cost	Cost Formula
Cost of good sold	$27 per unit sold
Advertising expense	$184,000 per quarter
Sales commissions	5% of sales
Shipping expense	$24,000 per quarter + $5.00 per unit sold
Administrative salaries	$94,000 per quarter
Insurance expense	$10,400 per quarter
Depreciation expense	$64,000 per quarter

Required:

1. Prepare a contribution format income statement for the next quarter.

2. Prepare a traditional format income statement for the next quarter.

 

Explanation

1.
Sales (37,000 units × $55 per unit) = $2,035,000

Cost of goods sold (37,000 units × $27 per unit) = $999,000

Sales commission (5% × $2,035,000) = $101,750

Shipping expense (37,000 units × $5.00 per unit) = $185,000

2.

Sales (37,000 units × $55 per unit) = $2,035,000

Cost of goods sold (37,000 units × $27 unit) = $999,000

Sales commission (5% × $2,035,000) = $101,750

Shipping expense [$24,000 + (37,000 units × $5.00 per unit)] = $209,000

Thanks