Tuesday 24 July 2012

Redhawk, Inc., is a merchandiser that provided the following information:

Redhawk, Inc., is a merchandiser that provided the following information:

  Number of units sold 10,000  
  Selling price per unit $ 15  
  Variable selling expense per unit $ 2  
  Variable administrative expense per unit $ 1  
  Total fixed selling expense $ 20,000  
  Total fixed administrative expense $ 15,000  
  Merchandise inventory, beginning balance $ 12,000  
  Merchandise inventory, ending balance $ 22,000  
  Merchandise purchases $ 90,000  


Required:
1. Prepare a traditional income statement. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Redhawk, Inc.
Traditional Income Statement
  Sales $  
  Cost of goods sold  

  Gross margin  
  Selling and administrative expenses:
       Selling expenses $
       Administrative expenses  


  Net operating income $  




2. Prepare a contribution format income statement. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Redhawk, Inc.
Contribution Format Income Statement
  Sales  $  
  Variable expenses:
       Cost of goods sold $
       Selling expenses
       Administrative expenses  


  Contribution margin  
  Fixed expenses:
       Selling expenses
       Administrative expenses  


  Net operating income $  





Explanation: 1.
Sales: ($15 per unit × 10,000 units) = $150,000
Cost of goods sold: ($12,000 + $90,000 – $22,000) = $80,000
Selling expenses: (($2 per unit × 10,000 units) + $20,000) = $40,000
Administrative expenses: (($1 per unit × 10,000 units) + $15,000) =$25,000

2.
Cost of goods sold: ($12,000 + $90,000 – $22,000) = $80,000
Selling expenses: ($2 per unit × 10,000 units) = $20,000
Administrative expenses: ($1 per unit × 10,000 units) = $10,000

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