Marwick’s Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,518 per unit and then sells them to retail customers for an average price of $2,300 each. The company’s selling and administrative costs for a typical month are presented below:
Costs Cost Formula Selling: Advertising $ 961 per month Sales salaries and commissions $ 4,822 per month, plus 6% of sales Delivery of pianos to customers $ 62 per piano sold Utilities $ 632 per month Depreciation of sales facilities $ 4,953 per month Administrative: Executive salaries $ 13,583 per month Insurance $ 696 per month Clerical $ 2,546 per month, plus $44 per piano sold Depreciation of office equipment $ 925 per month
During August, Marwick’s Pianos, Incorporated, sold and delivered 59 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.