Marwick’s Pianos, Inc., purchases pianos from a largemanufacturer for an average cost of $1,513 per unit and then sellsthem to retail customers for an average price of $2,200 each. Thecompany’s selling and administrative costs for a typical month arepresented below:
| Costs | Cost Formula |
| Selling: | | |
| Advertising | $ | 962 permonth |
| Sales salariesand commissions | $ | 4,830 per month,plus 5% of sales |
| Delivery ofpianos to customers | $ | 62 per pianosold |
| Utilities | $ | 662 permonth |
| Depreciation ofsales facilities | $ | 5,068 permonth |
| Administrative: | | |
| Executivesalaries | $ | 13,579 permonth |
| Insurance | $ | 690 permonth |
| Clerical | $ | 2,539 per month,plus $35 per piano sold |
| Depreciation ofoffice equipment | $ | 942 permonth |
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During August, Marwick’s Pianos, Inc., sold and delivered 62pianos.
Required:
1. Prepare a traditional format income statement forAugust.
2. Prepare a contribution format income statement for August. Showcosts and revenues on both a total and a per unit basis downthrough contribution margin.
