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.

In order to find Net Income as per traditional income statement, we will first require to calculate cost of goods sold as below:

Beginning Merchandise Inventory24000

Add: Purchases180000

Less: Ending Merchandise Inventory(44000)

Cost of Goods Sold160000

Traditional Income Statement

Sales600000

Less: Cost of Goods Sold(160000)

Gross Profit440000

Less: Selling and Administrative Expenses

Variable Selling Expense80000

Variable Admin Expense40000

Fixed Selling Expense40000

Fixed Admin Expense30000

Total (190000)

Net Income250000