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ACC - Problem 2-14 House of Organs, Inc.,




Question;Problem 2-14House 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. $2,500 $1,500 House of Organs, Inc., has always kept careful records of its costs. The costs that the company incurs in a typical month are presented below in the form of a spreadsheet: 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 4% Utilities $650 per month Depreciation of Sales Facilities $5,000 per month Administrative: Executive Salaries $13,500 per month Depreciation of Office Equipment $900 per month Clerical $2,500 per month, plus $40 per organ sold $40 Insurance $700 per month During November, the company sold and delivered 60 organs. 60Required: 1. Prepare a Traditional income statement for November 2. Prepare contribution format income stt for Nov. Show costs 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?


Paper#40502 | Written in 18-Jul-2015

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