Question

4. (6 points) The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31: $ A Sales Sales in units Selling price per pair of skis Variable selling expense per pair of skis Variable administrative expense per pair of skis Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases Amount 166,400 208 pairs 800 42 10 23,000 28,000 40,000 30,000 115,000 A A A A $ Note: to calculate COGS you will need to use the following equation: Beg. Merch. Inventory + Merch. Purchases - End. Merch. Inventory. COGS is a variable expense. Required: 1. Prepare a traditional income statement for the quarter ended March 31. 2. Prepare a contribution format income statement for the quarter ended March 31. 3. What was the contribution margin per unit?

Answer 1

The Alpine House, Inc. Tradional Income Statement For the quarter Ended March 31 Sales $ 166,400 Cost of Goods Sold $ 125,000 Gross Profit $ 41,400 Selling and administrative expenses: Variable Selling expenses $ 8,736 Variable administrative Expenses $ 2,080 Fixed Selling expenses $ 23,000 Fixed administrative Expenses $ 28,000 $ 61,816 Net Income $ (20,416) $ 166,400 The Alpine House, Inc. Contribution Format Income Statement For the quarter Ended March 31 Sales Variable Expenses : Variable Cost of Goods Sold $ 125,000 Variable Selling expenses $ 8,736 Variable administrative Expenses $ 2,080 Contribution Margin $ 135,816 $ 30,584

Fixed Expenses : Fixed Selling expenses Fixed administrative Expenses Net Income $ 23,000 $ 28,000 $ 51,000 $ (20,416) Working Notes: Variable Cost of Goods sold = Beginning Inventory+Merchandise Purchases -Ending inventory = $40,000+$115,000-$30,000 = $125,000 Variable Selling expenses = 208*$42 = $8,736 Variable administrative expenses = 208*$10 = $2,080 3 Contribution Margin per unit $ 147 Contribution per surfboard = Contribution Margin/Selling units = $30,584/208 = $147