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	$	1,312,000
Selling price per pair of skis	$	410
Variable selling expense per pair of skis	$	49
Variable administrative expense per pair of skis	$	20
Total fixed selling expense	$	140,000
Total fixed administrative expense	$	105,000
Beginning merchandise inventory	$	65,000
Ending merchandise inventory	$	100,000
Merchandise purchases	$	310,000

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

Requirement 1. Alpine House, Inc., Income Statement - Traditional March 31 Sales $1,312,000 Less: Cost of Goods Sold $275,000 Gross Profit $1,037,000 Selling Expenses Fixed Selling Expenses $140,000 Total Fixed Administrative Expenses $105,000 Total Expenses $245,000 Net Income $792,000 Workings 1: Cost of Goods Sold Beginning merchandise inventory Add: Merchandise purchases Less: Ending merchandise inventory Cost of Goods Sold $65,000 $310,000 -$100,000 $275,000

Requirement 2. Alpine House, Inc., Income Statement -Contribution Margin March 31 Sales $1,312,000 Less: Variable Costs Variable selling expense (3,200 * $49) $156,800 Variable administrative expense (3,200 * $20) | $64,000 Total Variable Costs -$220,800 Contribution Margin $1,091,200 Less: Fixed Costs Total Fixed Selling Expenses $140,000 Total Fixed Administrative Expenses $105,000 Total Fixed Costs -$245,000 Net Income $846,200 Sales Unit = $1,312,000 / $410 = 3,200 units

$410 Requirement 3. Selling price per Unit Less: Variable Cost per Unit ($49 + $20) Contribution Margin per Unit -$69 $341