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House of Organs, Inc., purchases organs from a well-known
House of Organs, Inc., purchases organs from a well-known
manufacturer and sells them at the retail level. The organs sell, on the
average, for $2,500 each. The average cost of an organ from the
manufacturer is $1,500. The costs that the company incurs in a typical
month are presented below:
Costs Cost Formula
Selling:
Advertising $950 per month
Delivery of organs $60 per organ sold
Sales salaries and commissions $4,800 per month, plus 4% of sales
Utilities $650 per month
Depreciation of sales facilities $4,916 per month
Administrative:
Executive salaries $13,500 per month
Depreciation of office equipment $900 per month
Clerical $2,500 per month, plus $41 per organ sold
Insurance $700 per month
During November, the company sold and delivered 60 organs.
Prepare a traditional income statement for November. (Input all
amounts as positive values except losses which should be indicated by a
minus sign.)
House of Organs, Inc.
Traditional Income Statement
For the Month Ended November 30
Selling and administrative expenses:
Selling expenses:
Total selling expenses
Administrative expenses:
Total administrative expenses
Total selling and administrative expenses
Prepare a contribution format income statement for November. Show
cost and revenues on both a total and a per unit basis down through
contribution margin.
3. Refer to the income statement you prepared in (2) above. Why might
it be misleading to show the fixed costs on a per unit basis?
