House
of Organs, Inc., purchases organs from a well-known manufacturer and
sells them at the retail level. The organs sell, on the average, for
$2,500 each. The average cost of an organ from the manufacturer is
$1,500. The costs that the company incurs in a typical month are
presented below:
| Costs | Cost Formula |
| Selling: | |
| Advertising | $950 per month |
| Delivery of organs | $60 per organ sold |
| Sales salaries and commissions | $4,800 per month, plus 4% of sales |
| Utilities | $650 per month |
| Depreciation of sales facilities | $5,000 per month |
| Administrative: | |
| Executive salaries | $13,500 per month |
| Depreciation of office equipment | $900 per month |
| Clerical | $2,500 per month, plus $40 per organ sold |
| Insurance | $700 per month |
| During November, the company sold and delivered 60 organs. |
| Required: | |
| 1. |
Prepare a traditional income statement for November. (Input
all amounts as positive values except losses which should be indicated
by a minus sign. Omit the "$" sign in your response.)
|
| House Of Organs, Inc. Traditional Income Statement For the Month Ended November 30 | ||
| Sales | $ | |
| Cost of goods sold | ||
| Gross margin | ||
| Selling and administrative expenses: | ||
| Selling expenses: | ||
| Advertising | $ | |
| Delivery of organs | ||
| Sales salaries and commissions | ||
| Utilities | ||
| Depreciation of sales facilities | ||
| Total selling expenses | ||
| Administrative expenses: | ||
| Executive salaries | ||
| Depreciation of office equipment | ||
| Clerical | ||
| Insurance | ||
| Total administrative expenses | ||
| Total selling and administrative expenses | ||
| Net operating income | $ | |
| 2. |
Prepare a contribution format income statement for November.
(Input all amounts as positive values except losses which should be
indicated by a minus sign. Omit the "$" sign in your response.)
|
| House Of Organs, Inc. Contribution Format Income Statement For the Month Ended November 30 | ||
| Total | Per unit | |
| Sales | $ | $ |
| Variable expenses: | ||
| Cost of goods sold | ||
| Delivery of organs | ||
| Sales commissions | ||
| Clerical | ||
| Total variable expenses | ||
| Contribution margin | $ | |
| Fixed expenses: | ||
| Advertising | ||
| Sales salaries | ||
| Utilities | ||
| Depreciation of sales facilities | ||
| Executive salaries | ||
| Depreciation of office equipment | ||
| Clerical | ||
| Insurance | ||
| Total fixed expenses | ||
| Net operating income | $ | |
Explanation:
| 1. | |
| Sales: (60 organs × $2,500 per organ) = $150,000 | |
| Cost of goods sold: (60 organs × $1,500 per organ) = $90,000 | |
| Delivery of organs: (60 organs × $60 per organ) = $3,600 | |
| Sales salaries and commissions: [$4,800 + (4% × $150,000)] = $10,800 | |
| Clerical: [$2,500 + (60 organs × $40 per organ)] = $4,900 | |
| 2. | |
| Sales: (60 organs × $2,500 per organ) = $150,000 | |
| Cost of goods sold: (60 organs × $1,500 per organ) = $90,000 | |
| Delivery of organs: (60 organs × $60 per organ) = $3,600 | |
| Sales commissions: (4% × $150,000) = $6,000 | |
| Clerical: (60 organs × $40 per organ) = $2,400 |
