Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $1,488 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $2,900 each. The selling and administrative costs that the company incurs in a typical month are presented below:
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Costs
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Cost Formula
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Selling:
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Advertising
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$942 per month
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Sales salaries and commissions
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$4,799 per month, plus 3% of sales
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Delivery of pianos to customers
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$60 per piano sold
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Utilities
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$650 per month
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Depreciation of sales facilities
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$4,945 per month
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Administrative:
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Executive salaries
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$13,566 per month
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Insurance
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$685 per month
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Clerical
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$2,480 per month, plus $36 per piano sold
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Depreciation of office equipment
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$900 per month
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During August, Marwick’s Pianos, Inc., sold and delivered 63 pianos.
Required:
1.Prepare an income statement for Marwick’s Pianos, Inc., for August. Use the traditional format, with costs organized by function. (A "Net operating loss" should be entered as a negative number.)
2.Prepare an income statement for Marwick’s Pianos, Inc., for August, 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. (A "Net operating loss" should be entered as a negative number.)