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: $ 1,462,000 49 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 140.000 130.000 65,000 105,000 295,000 $ $ 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3

Answer 1

Answer to Requirement 1. The Alpine House, Inc. Traditional Income Statement Sales Cost of Goods Sold Gross Margin Selling and Administrative Expenses: Selling Expenses Administrative Expenses Total Selling and Administrative Expenses Net Operating Income 1,462,000 255,000 1,207,000 306,600 191,200 497,800 709,200 Calculation: Units Sold = $1,462,000 / $430 = 3,400 Skis Cost of Goods Sold = Beginning Inventory + Merchandise Purchases - Ending Inventory Cost of Goods Sold = $65,000 + $295,000 - $105,000 = $255,000 Selling Expenses = $140,000 + ($49 * 3,400) = $306,600 Administrative Expenses = $130,000 + ($18 * 3,400) = $191,200

1,462,000 Answer to Requirement 2. The Alpine House, Inc. Contribution Format Income Statement Sales Variable Expenses: Cost of Goods Sold 255,000 Selling Expenses 166,600 Administrative Expenses 61,200 Total Variable Expenses Contribution Margin Fixed Expenses: Selling Expenses 140,000 Administrative Expenses 130,000 Total Fixed Expenses Net Operating Income 482,800 979,200 270,000 709,200 Calculation: Units Sold = $1,462,000 / $430 = 3,400 Skis Cost of Goods Sold = Beginning Inventory + Merchandise Purchases - Ending Inventory Cost of Goods Sold = $65,000 + $295,000 - $105,000 = $255,000 Variable Selling Expenses = $49 * 3,400 = $166,600 Variable Administrative Expenses = $18 * 3,400 = $61,200

Answer to Requirement 3:
Contribution Margin per Unit = Selling Price per Unit - Variable Cost per Unit
Cost of Goods Sold per Unit = $255,000 / 3,400 = $75
Variable Cost per Unit = $75 + $49 + $18 = $142
Contribution Margin per Unit = $430 - $142
Contribution Margin per Unit = $288