Question

TUICIJI. Amount $ 1,100,000 440 UU 47 16 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 merchandige inventory Merchandise purchases $ $ $ $ $ 155,000 115,000 75,000 110,000 295,000 5:15 -k 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 rences Prepare a contribution format income statement for the quarter ended March 31. The Alpine House, Inc. Contribution Format Income Statement Sales Variable expenses: Cost of goods sold Selling expenses Administrative expenses Fixed expenses: Selling expenses Administrative expenses

Answer 1

1) Under traditional income statement approach, all manufacturing costs including fixed manufacturing overhead costs are considered as product costs. Accordingly, cost of goods sold is calculated by considering both variable and fixed manufacturing costs. Also, there will not be any segregation between fixed costs and variable costs. Therefore, The Alpine House, Inc. Traditional Income Statement $1,100,000 Sales $260,000 Cost of Goods Sold $840,000 Gross Profit $272,500 [($1100000/$440) x $47 + $155000] Selling Expenses Administrative Expenses $155,000 $427,500 [($1100000/$440) x $16 + $115000] $412,500 Net Income Workings: $75,000 Beginning Inventory $295,000 $370,000 Add: Merchandise Purchase Total Goods Available for Sale $110,000 Less: Ending Inventory $260,000 Cost of Goods Sold

2) Under contribution margin income statement approach, variable mfg. costs only are considered as product costs. Accordingly, cost of goods sold is calculated by considering only variable mfg. costs. Also, there will be proper segregation between fixed costs and variable costs. Therefore, The Alpine House, Inc. Traditional Income Statement $1,100,000 Sales Variable Expenses: [As calculated in Requirement-1] $260,000 Cost of Goods Sold $117,500 [($1100000/$440) x $47] [($1100000/$440) x $16] Selling Expenses Administrative Expenses $40,000 Leave this row blank $417,500 Leave this row blank Contribution Margin $682,500 Fixed Expenses: $155,000 Selling Expenses Administrative Expenses [Given] $115,000 [Given] Leave this row blank $270,000 Leave this row blank $412,500 Net Income

3) Contribution margin per unit = Contribution margin / Number of units sold Contribution margin $682,500 [Ref: Requirement-2] 2,500 [$1100000 / $440 --> As selling price per unit is $440] $273 [$682500 / 2500 units] Number of units sold Contribution margin per unit