House of the organs Inc,Purchases organs from well known manufacturers and sell them at the retail level. The organ sells, on the average, for $2,500 each. The average cost of the organs from manufacturers is $1,500.The cost that the company incurs in a typical month are presented below:
Costs Costs Formula
Advertising $950 per month
Delivery of organs $60 per Organ sold
Sales salaries and commissions $4,800 per month, Plus 4% of sales
Utilities $650 per month
Depreciations of Sales facilities $5,000 per month
Executive salaries $13,500 per month
Depreciation of office Equipment $900 per month
Clerical $2,500 per month plus $40 per organ sold
Insurance $700 per month
During the November the company sold and delivered 60 Organs.
1. Prepare a Traditional income statement for November.
2. Prepare a contribution format income statement for November.show cost and revenues on both a total and 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 cost on a per unit basis.