Question

Exercise 1-15 Traditional and Contribution Format Income Statements (LO1-6) 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 $ 1,134,000 420 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 $ $ $ $ 150.000 125,000 70,000 115,000 305,000 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

The answer has been presented in the supporting sheet

All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer 3 Part 1) Apline House Inc. Traditional Format Income Statement For the Quarter Ended March 31 - Sales 1134000 3 Less Cost of goods sold Beginning inventory 0 (+) Purchases 1 (-) Ending inventory 2 Gross Margin 70000 305000 115000 260000 874000 3 Selling expenses (150000+(47*2700)) 276900 4 Adminstrative expenses (125000+(19*2700)) 176300 5 Net Operating Income 420800 7 No. of unit sold = sales / sale price per unit 8 = 1134000/420 %3D = 2700 Units

21 Part 2) 22 Apline House Inc. Contribution Format Income Statement 23 For the Quarter Ended March 31 24 25 Sales 1134000 26 Variable cost of goods sold (70000+305000-115000) 27 Variable selling expenses (47*2700) 28 Variable adminstrative expenses (19*2700) 29 Contribution margin 30 Fixed selling expenses 31 Fixed adminstrative expenses 260000 126900 51300 695800 150000 125000 32 Net Operating Income 420800 33 34 Part 3) 35 Contribution Margin Per Unit = total contribution margin / units sold 36 37 = 695800/2700 = $ 257.7 38 39 40 Thus the correct answer contribution margin per unit is $ 257.7 41