Chapter 2: Managerial Accounting and Cost Concepts

Problem 2-14
1.
| House Of Organs, Inc. | | Traditional Income Statement | | For the Month Ended November 30 | | | | | | Sales (60 organs × $2,500 per organ) | | $150,000 | | Cost of goods sold
(60 organs × $1,500 per organ) | | 90,000 | | Gross margin | | 60,000 | | Selling and administrative expenses: | | | | Selling expenses: | | | | Advertising | $ 950 | | | Delivery of organs
(60 organs × $60 per organ) | 3,600 | | | Sales salaries and commissions
[$4,800 + (4% × $150,000)] | 10,800 | | | Utilities | 650 | | | Depreciation of sales facilities | 5,000 | | | Total selling expenses | 21,000 | | | Administrative expenses: | | | | Executive salaries | 13,500 | | | Depreciation of office equipment | 900 | | | Clerical
[$2,500 + (60 organs × $40 per organ)] | 4,900 | | | Insurance | 700 | | | Total administrative expenses | 20,000 | | | Total selling and administrative expenses | | 41,000 | | Net operating income | | $ 19,000 | | | | |

Problem 2-14 (continued) 2. | House Of Organs, Inc. | | Contribution Format Income Statement | | For the Month Ended November 30 | | | | | | | Total | Per Unit | | Sales (60 organs × $2,500 per organ) | $150,000 | $2,500 | | Variable expenses: | | | | Cost of goods sold
(60 organs × $1,500 per organ) | 90,000 | 1,500 | | Delivery of organs
(60 organs × $60 per organ) | 3,600 | 60 | | Sales commissions (4% × $150,000) | 6,000 | 100 | | Clerical (60 organs × $40 per organ) | 2,400 | 40 | | Total variable expenses | 102,000 | 1,700 | | Contribution margin | 48,000 | $ 800 | | Fixed expenses: | | | |