Introduction to Managerial Accounting, Canadian Edition, by Garrison, Noreen, Kalagnanam, and
Alternate Problems-Set A, Chapter 6
Contribution Format Income Statement
(1) Net income is $1,400
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos
cost, on the average, $125 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at
an average price of $250 each. The selling and administrative costs that the company incurs in a typical month are
$800 per month
Sales salaries and commissions
$1,200 per month, plus 10% of sales
Delivery of pianos to customers
$15 per piano sold
$500 per month
Depreciation of sales facilities
$750 per month
$2,000 per month
$250 per month
$700 per month, plus $5 per piano sold
Depreciation of office equipment
$400 per month
During June, Marwick’s Pianos, Inc., sold and delivered 100 pianos.
1. Prepare an income statement for Marwick’s Pianos, Inc., for June. Use the traditional format, with costs
organized by function.
2. Redo (1) above, this time using the contribution format, with costs organized by behavior. Show costs and
revenues on both 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?