Marwick’s Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,509 per unit and then sells them to retail customers for an average price of $2,000 each. The company’s selling and administrative costs for a typical month are presented below: CostsCost FormulaSelling: Advertising$ 952per monthSales salaries and commissions$ 4,776per month, plus 5% of salesDelivery of pianos to customers$ 63per piano soldUtilities$ 663per monthDepreciation of sales facilities$ 5,029per monthAdministrative: Executive salaries$ 13,453per monthInsurance$ 686per monthClerical$ 2,480per month, plus $42 per piano soldDepreciation of office equipment$ 887per month During August, Marwick’s Pianos, Incorporated, sold and delivered 57 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.

Introduction: An income statement is a financial statement that shows a company's income and…

Answered: Marwick’s Pianos, Incorporated,…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

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Marwick’s Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,509 per unit and then sells them to retail customers for an average price of $2,000 each. The company’s selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$ 952	per month
Sales salaries and commissions	$ 4,776	per month, plus 5% of sales
Delivery of pianos to customers	$ 63	per piano sold
Utilities	$ 663	per month
Depreciation of sales facilities	$ 5,029	per month
Administrative:
Executive salaries	$ 13,453	per month
Insurance	$ 686	per month
Clerical	$ 2,480	per month, plus $42 per piano sold
Depreciation of office equipment	$ 887	per month

During August, Marwick’s Pianos, Incorporated, sold and delivered 57 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.

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