Question

Milden Company is a merchandiser that plans to sell 12,000 units during the next quarter at a selling price of $100 per unit. The company also gathered the following cost estimates for the next quarter: Cost Cost Formula Cost of good sold $35 per unit sold Advertising expense $210,000 per quarter Sales commissions 6% of sales Shipping expense $28,000 per quarter + $9.10 per unit sold Administrative salaries $145,000 per quarter Insurance expense $9,000 per quarter Depreciation expense $76,000 per quarter

Answer 1

To calculate the total revenue, multiply the quantity of units sold by the selling price. The total cost can be found by summing up all the individual cost estimates provided. The total revenue is $1,200,000 and the total cost is $1,275,000.

Step-by-step explanation:

To calculate the total revenue, we multiply the quantity of units sold by the selling price. So, the total revenue for the next quarter would be 12,000 units multiplied by $100, which equals $1,200,000.

The total cost of goods sold can be found by multiplying the cost per unit sold by the number of units sold. In this case, it would be 12,000 units multiplied by $35, resulting in a total cost of goods sold of $420,000.

To calculate the total cost, we sum up all the individual cost estimates provided. So, the total cost would be $210,000 (advertising expense) + 6% of sales (sales commissions) + $28,000 (shipping expense) + $145,000 (administrative salaries) + $9,000 (insurance expense) + $76,000 (depreciation expense), which equals $1,275,000.

Answer 2

Part 1 – Milden Company – Contribution format income Statement

Sales (12000 × 100) = 1,200,000

Less: Variable Cost

COGS (12000 × 35) = 420,000

Sales Commissions (1,200,000 × 6%) = 72,000

Shipping Exp. (12000 × 9.10) = 109,200

Total Variable Cost = 601,200

Contribution Margin = Sales – Variable Cost

Contribution Margin = 1,200,000 – 601,200

Contribution Margin = 598,800

Less: Fixed Cost

Adm. Salaries exp. = 145,000

Advertising exp. = 210,000

Shipping exp. = 28,000

Depreciation exp. = 76,000

Insurance exp. = 9000

Total Fixed cost = 468,000

Net Income = Contribution Margin - Total Fixed cost

Net Income = 598,800 – 468,000

Net Income = 130,800

Part 2 – Milden Company – Traditional format income Statement

Sales (12000 × 100) = 1,200,000

Less: COGS (12000 × 35) = 420,000

Gross Profit = 780,000

Less Operating expense

Sales Commission (1,200,000 × 6%) = 72,000

Shipping exp. (12000 × 9.10) + 28,000 = 137,200

Adm. Salaries exp. = 145,000

Advertising exp. = 210,000

Depreciation exp. = 76,000

Insurance exp. = 9000

Total Operating Expense = 649,200

Net Income = Gross Profit - Total Operating expense

Net Income = 780,000 – 649,200

Net Income = 130,800