Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold 13,000 Selling price per unit $ 16 Variable selling expense per unit $ 2 Variable administrative expense per unit $ 3 Total fixed selling expense $ 21,000 Total fixed administrative expense $ 15,000 Beginning merchandise inventory $ 11,000 Ending merchandise inventory $ 25,000 Merchandise purchases $ 88,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.

1. Gross margin is $134,00; and Net profit is $33,000.

2. Contribution margin is $69,000; and Net profit is $33,000.

Explanation:

To prepare the statements, the following calculations are done first:

Sales revenue = Number of units sold * Selling price per unit = 13,000 * $16 = $208,000

Variable selling expenses = Number of units sold * Variable selling expense per unit = 13,000 * $2 = $26,000

Total selling expenses = Variable selling expenses + Total fixed selling expense = $26,000 + $21,000 = $47,000

Variable administrative expense = Number of units sold * Variable administrative expense per unit = 13,000 * $3 = $39,000

Total administrative expense = Variable administrative expense + Total fixed administrative expense = $39,000 + $15,000 = $54,000

Cost of goods sold =  Beginning merchandise inventory + Merchandise purchases - Ending merchandise inventory = $11,000 + $88,000 - $25,000 = $74,000

The statements are now prepared as follows:

1. Prepare a traditional income statement.

The purpose of the traditional income statement is to obtain the gross margin and the net profit. These can be obtained as follows:

Cherokee Inc.

Traditional income statement

Details                                                      $        

Sales                                                  208,000

Cost of goods sold                            (74,000)

Gross margin                                    134,000

Selling and Admin. Expenses:

Selling expenses                              (47,000)

Administrative expense                   (54,000)  

Net profit                                           33,000  

2. Prepare a contribution format income statement

The purpose of the contribution format income statement is to obtain the contribution margin and the net profit. These can be obtained as follows:

Cherokee Inc.

Contribution format income statement

Details                                                      $        

Sales                                                  208,000

Variable expenses:

Cost of goods sold                            (74,000)

Selling expenses                               (26,000)

Administrative expense                    (39,000)  

Contribution margin                          69,000

Fixed expenses:

Selling expenses                               (21,000)

Administrative expense                    (15,000)  

Net profit                                             33,000  

Note:

Note that under both methods, the net profit is the same. This always holds no matter the method used.

Instructions are below.

Explanation:

Giving the following information:

Amount Number of units sold 13,000

Selling price per unit $16

Variable selling expense per unit $2

Variable administrative expense per unit $3

Total fixed selling expense $21,000

Total fixed administrative expense $15,000

Beginning merchandise inventory $11,000

Ending merchandise inventory $25,000

Merchandise purchases $88,000

First, we need to calculate the cost of goods sold:

COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory

COGS= 11,000 + 88,000 - 25,000= 74,000

1) Traditional income statement:

Sales= 13,000*16= 208,000

COGS= (74,000)

Gross profit= 134,000

Total selling expense= (2*13,000) + 21,000= (47,000)

Total administrative expense= (3*13,000) + 15,000= (54,000)

Net operating income= 33,000

2) Contribution format income statement:

Total variable cost= (3 + 2)*13,000 + 74,000= $139,000

Sales= 208,000

Total variable cost= (139,000)

Contribution margin= 69,000

Total fixed selling expense= (21,000)

Total fixed administrative expense= (15,000)

Net operating income=  33,000

answer; ///(c) i believe its it ignores cash flows following the payback period;

muslims control the north africa during the period of 1500 up

to 1800. they made a barrier to prevent further european exploration from

entering the africa from the north. however, the dutch ware still able to move

toward the interior with having south africa as one of the routes leading to

the east for trading with asia.