Income Statement Traditional Format

Is a merchandiser that provided the following information.

Income statement traditional format. Amount number of units sold 20 000 selling price per unit 30 variable selling expense per unit 4 variable administrative expense per unit 2 total fixed selling expense 40 000 total fixed administrative expense 30 000 beginning merchandise. An alternative format is the contribution margin income statement in which variable expenses are aggregated into what would have been the cost of goods sold block in a traditional income statement. Cost of goods sold section shows the cost of goods sold to produce the sales. Traditional income statement also known as a profit and loss statement a traditional income statement shows the extent to which a company is profitable or not during a given accounting period.

Multi step income statement format is any day better than a single step statement as it provides proper detailing. Exercise 1 15 traditional and contribution format income statements lo1 6 the alpine house inc is a large retailer of snow skis. The management of the company might shift the expenses from the cost of goods sold and into the operations to improve their margins artificially. All other costs which should be fixed costs are aggregated into a block that is positioned below the contribution margin line.

Amount sales 1 419 000 selling price per pair of skis 430 variable selling expense per pair of skis 50 variable administrative expense per pair of skis 19 total fixed. The format for the traditional income statement. Let s use the example from the absorption. Sales or revenue section presents sales discounts allowances returns and other related information.

Example of the traditional income statement. And also show the gross profit less the selling and administrative expenses and that equals the operating income. The traditional income statement format uses absorption or full costing in which variable and fixed manufacturing costs are part of the inventory costs and thus part of the cost of goods sold. Exercise 1 6 traditional and contribution format income statements lo1 6 cherokee inc.

But if it is not prepared correctly then it can be misleading. The basic format is to simply show the sales less the cost of goods sold equal gross profit. It comes with several sample formats and illustrations to make it in a presentable way. The company assembled the information shown below for the quarter ended march 31.