Question

The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31: $ Amount 1,160,eee 400 49 17 Sales 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 155,000 100,000 75,000 120,000 315,00 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

Sales revenue	$ 1,160,000
Selling price	$              400
Number of units sold ($1,160,000/400)	2,900

1.

Alpine House Inc
Traditional income statement
Sales Revenue		$ 1,160,000
Less: Cost of goods sold ($75,000+$315,000-$120,000)		$     270,000
Gross Profit		$     890,000
Less: Operating expenses
Selling Expenses ((2,900*49)+155,000)	$ 297,100
Adminsitrative Expenses ((2,900*17)+100,000)	$ 149,300
Total Operating Expense		$     446,400
Operating Income		$     443,600

2.

Cherokee Inc.
Income Statement (Contribution Format)
Sales revenue		$ 1,160,000
Less:Variable expense
Cost of goods sold ($75,000+$315,000-$120,000)	$ 270,000
Selling Expense (2,900*$49)	$ 142,100
Administrative Expense (2,900*$17)	$    49,300
Total variable expenses		$     461,400
Contribution Margin		$     698,600
Less: Fixed Expense
Selling Expense	$ 155,000
Administrative Expense	$ 100,000
Total fixed expenses		$     255,000
Net Operating Income		$     443,600

Contribution margin per units = Contribution margin / Number units sold

Contribution margin per units = $698,600 / 2,900

Contribution margin per units = $240.89655

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