Tradition vs. Contribution Income Statement.
15% of your grade in the class: PAPER A- Problem 2- 19 Tradition vs. Contribution Income Statement. PP 57-58 answer Q1-3. Include a cover page, a reference page, and format everything using APA 6th ed. guidelines. Use credible sources (not Wikipedia, Investopedia, or blogs). Upload in Connect
Paper A: Grading Rubric
Contribution (AKA Variable Income Statement) verses Traditional Income Statement
Used to Determine Your Grade
Out of 15 Points
| Criterion | Unsatisfactory | Satisfactory | Exceptional | Score In Points |
| 1.Paper is at least 4 pages long, not including title page and references | Does not meet the requirement | Meets the requirement | 1 pt | |
| 2. Paper includes at least two peer-review scholarly journal articles to support the ethics in this case | Does not meet the requirement | Meets the requirement | 2 pts | |
| INTRODUCTION- Page 1: Introduction- Discussed the differences between Contribution (AKA Variable Income Statement) verses Traditional Income Statement
| Below the requirement. | Meets the requirement | Exceeds the requirement and is well supported. | 2 pt |
| BODY OF THE PAPER Page 2: Body- Prepared, Analyzed, and Discussed an Income Statement for August using traditional format, with costs organized by function Page 3: Body- Prepared, Analyzed, and Discussed an Income Statement for August using Contribution format, with costs organized by behavior. This income statement is also known as the variable Cost Income Statement CONCLUSION Page 4- Conclusion- Referred to the income statement your prepared in the body of the paper. Why might it be misleading to show the fixed costs on a per unit basis? | Demonstrates a level of knowledge that is below the requirement. | Meets the requirement. | Exceeds the requirement. | 10 pts |
1.
Marwick’s Pianos, Inc.,
Income Statement for the month of August, XXXX
____________________________________________________
Sales Revenue (40 pianos x $3,125) $125,000
Less : Cost of goods sold (40 x $2,450) $98,000
Gross Profit $27,000
Less : Operating expenses
Selling expenses
Advertising $700
Sales Salaries & Comm.
$950 + ($125,000 x 8%) $10,950
Delivery (40 x $30) $1,200
Utilities $350
Depr. of Sales facilities $800
Total Selling expenses $14,000
Administrative expenses
Executive Salaries $2,500
Insurance $400
Clerical $1,000 +(40x$20) $1,800
Depr. of office equipment $300
Total administrative expenses $5,000
Total operating expenses $19,000
Net operating Income $8,000
2.
Marwick’s Pianos, Inc.,
Income Statement for the month of August, XXXX
______________________________________________________
Total Per Unit
Sales Revenue (40 pianos x $3,125) $125,000 $3,125
Less : Variable expenses:
Cost of goods sold (40x$2,450) $98,000 $2,450
Sales Commission $125,000 x 8% $10,000 $250
Delivery (40 x $30) $1,200 $30
Clerical 40 x $20 $800 $20
Total variable expenses $110,000 $2,750
Contribution margin $15,000 $375
Less : Fixed expenses
Advertising $700
Sales Salaries $950
Utilities $350
Depr. of Sales facilities $800
Executive Salaries $2,500
Insurance $400
Clerical $1,000
Depr. of office equipment $300
Total Fixed expenses $7,000
Net operating Income $8,000
3. Fixed costs remain constant in total but vary on a per unit basis inversely with changes in the activity level. As the activity level increases, for example, the fixed costs will decrease on a per unit basis. Showing fixed costs on a per unit basis on the income statement might mislead management into thinking that the fixed costs behave in the same way as the variable costs. That is, management might be misled into thinking that the per unit fixed costs would be the same regardless of how many pianos were sold during the month. For this reason, fixed costs generally are shown only in totals on a contribution format income statement.
