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 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 $ 1,075,000 430 46 19 $150,000 $ 115,000 $65,800 $ 105,000 315,e00 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

a.

The Alpine House, Inc.
Traditional Income Statement
For the Quarter Ended March 31
Sales revenue		1075000
Cost of goods sold		275000
Gross profit		800000
Selling and administrative expenses:
Variable selling expenses (2500 x $46)	115000
Fixed selling expenses	150000
Variable administrative expenses (2500 x $19)	47500
Fixed administrative expenses	115000	427500
Net income		372500

b.

The Alpine House, Inc.
Contribution Format Income Statement
For the Quarter Ended March 31
Sales revenue		1075000
Variable expenses:
Cost of goods sold	275000
Selling expenses	115000
Administrative expenses	47500	437500
Contribution margin		637500
Fixed expenses:
Selling expenses	150000
Administrative expenses	115000	265000
Net income		372500

c. Contribution toward fixed expenses and profits for each pair of skis sold during the quarter = Contribution margin / Number of pairs of skis sold = $637500/2500 pairs = $255

Calculations:

Number of pairs of skis sold = Total sales revenue / Selling price per pair of skis = $1075000/430 = 2500 pairs  

Cost of goods sold:
Beginning merchandise inventory	65000
Add Merchandise purchases	315000
Cost of goods available for sale	380000
Less Ending merchandise inventory	105000
Cost of goods sold	275000