Managerial Accounting

Formative Assessment 1
MET: Managerial Accounting Concepts and Principles

Problem:

Tahum Company plans to sell 12,000 units during the next semester at a selling prices of $100
per unit sold. Below are the relevean cost estimates for the next semester.

a. Cost of good sold $ 35 per unit sold

b. Advertising Expense $ 210,000 per semester
c. Sales Commissions $ 6% of sales
d. Shipping Expense $ 28,000 per semester + $5 per unit sold
e. Administrative Salaries $ 145,000 per semester
f. Insurance Expense $ 9,000 per semester
g. Depreciation Expense $ 76,000 per semester

Required:
1. Prepare a contribution format income statement.
2. Prepare a tradition format income statement.

Solution:

TAHUM COMPANY
CONTRIBUTION MARGIN INCOME STATEMENT

Sales ($ 100*12,000) $1,200,000

Less: Variable Costs

Cost of Goods Sold ($35*12,000) 420,000
Sales Commission ($6%*1,200,000) 72,000
Shipping Expense ($5*12,000) 60,000

Contribution Margin 648,000

Less: Fixed Costs

Advertising Expennse 210,000
Shipping Expense 28,000
Administrative Salaries 145,000
Insurance Expense 9,000
Depreciation Expense ($76,000*2) 152,000

Net Income 104,000

 TAHUM COMPANY
TRADITIONAL INCOME STATEMENT

Sales ($ 100*12,000) $1,200,000

Cost of Goods Sold ($35*12,000) $420,000
Gross Profit $780,000

General and Administrative Expenses

Administrative Salaries 145,000
Insurance Expense 9,000

Selling and Distribution Expenses

Advertising Expense 210,000
Sales Commissions ($6% *1,200,000) 72,000
Shipping Expenses ($28000 + ($5*12,000) 88,000

Depreciation Expense ($76,000*2) 152,000

Net Income 104,000

2. MINI CASE: CHEAP PART COSTS GENERAL MOTORS A FORTUNE

2. Mini Case: CHEAP PART COSTS GENERAL MOTORS A FORTUNE