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	$	1,012,000
Selling price per pair of skis	$	440
Variable selling expense per pair of skis	$	47
Variable administrative expense per pair of skis	$	15
Total fixed selling expense	$	145,000
Total fixed administrative expense	$	105,000
Beginning merchandise inventory	$	65,000
Ending merchandise inventory	$	115,000
Merchandise purchases	$	285,000

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

Solution

Alpine House Inc
Traditional Format Income Statement
Sales		$ 10,12,000.00
Cost of goods sold		$   2,35,000.00
Gross margin		$   7,77,000.00
Selling and administrative expenses:
Selling expenses	$ 2,53,100.00*
Administrative expenses	$ 1,39,500.00**
Total selling and administrative expenses		$   3,92,600.00
Net operating income		$     3,84,400.00

*(2300*47)+145000
**(2300*15)+105000

.

Alpine House Inc
Contribution margin Income statement
Sales		$   10,12,000.00
Less: Variable costs
Direct material used	$   2,35,000.00
Variable selling expenses	$   1,08,100.00
Variable administrative expenses	$       34,500.00
Total Variable cost		$     3,77,600.00
Contribution margin		$     6,34,400.00
Less: Fixed Costs
Fixed selling expenses'	$   1,45,000.00
Fixed administrative expenses	$   1,05,000.00
Total Fixed Costs		$     2,50,000.00
Net Income		$     3,84,400.00

.

Contribution margin (410-96-46-16)

$             275.83

Working

Sales price	$             440.00
Variable material cost (235000/2300)	$             102.17
Variable selling expenses	$               47.00
Variable administrative expenses	$               15.00
Contribution margin (440-102.17-47-15)	$             275.83