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18 November, 21:46

Milden Company is a merchandiser that plans to sell 12,000 units during the next quarter at a selling price of $100 per unit. The company also gathered the following cost estimates for the next quarter: Cost Cost Formula Cost of good sold $35 per unit sold Advertising expense $210,000 per quarter Sales commissions 6% of sales Shipping expense $28,000 per quarter + $9.10 per unit sold Administrative salaries $145,000 per quarter Insurance expense $9,000 per quarter Depreciation expense $76,000 per quarter

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  1. 19 November, 00:34
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    Part 1 - Milden Company - Contribution format income Statement

    Sales (12000 * 100) = 1,200,000

    Less: Variable Cost

    COGS (12000 * 35) = 420,000

    Sales Commissions (1,200,000 * 6%) = 72,000

    Shipping Exp. (12000 * 9.10) = 109,200

    Total Variable Cost = 601,200

    Contribution Margin = Sales - Variable Cost

    Contribution Margin = 1,200,000 - 601,200

    Contribution Margin = 598,800

    Less: Fixed Cost

    Adm. Salaries exp. = 145,000

    Advertising exp. = 210,000

    Shipping exp. = 28,000

    Depreciation exp. = 76,000

    Insurance exp. = 9000

    Total Fixed cost = 468,000

    Net Income = Contribution Margin - Total Fixed cost

    Net Income = 598,800 - 468,000

    Net Income = 130,800

    Part 2 - Milden Company - Traditional format income Statement

    Sales (12000 * 100) = 1,200,000

    Less: COGS (12000 * 35) = 420,000

    Gross Profit = 780,000

    Less Operating expense

    Sales Commission (1,200,000 * 6%) = 72,000

    Shipping exp. (12000 * 9.10) + 28,000 = 137,200

    Adm. Salaries exp. = 145,000

    Advertising exp. = 210,000

    Depreciation exp. = 76,000

    Insurance exp. = 9000

    Total Operating Expense = 649,200

    Net Income = Gross Profit - Total Operating expense

    Net Income = 780,000 - 649,200

    Net Income = 130,800
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