Business, 19.05.2020 16:20 jahjah1158

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,513 per unit and then sells them to retail customers for an average price of $2,600 each. The company’s selling and administrative costs for a typical month are presented below:

Costs Cost Formula
Selling:
Advertising $954 per month
Sales salaries and commissions $4,781 per month, plus 4% of sales
Delivery of pianos to customers $57 per piano sold
Utilities $640 per month
Depreciation of sales facilities $5,090 per month
Administrative:

Executive salaries $13,514 per month
Insurance $709 per month
Clerical $2,495 per month, plus $37 per piano sold
Depreciation of office equipment $884 per month

During August, Marwick's Pianos, Inc., sold and delivered 40 pianos.
Required:
a. Prepare an income statement for Marwick's Pianos, Inc., for August. Use the traditional format, with costs organized by function.
b. Redo (a) above, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin.
c. Refer to the income statement you prepared in (b) above. Why might it be misleading to show the fixed costs on a per unit basis?

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Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $1,513 per...

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