Question

Exercise 2-13 Traditional and Contribution Format Income Statements [LO2-6] 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 Total sales revenue Selling price per pair of skis Variable selling expense per pair of skis $ Variable administrative expense per pair $1,240,0000 $400 50 20 of skis Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 150,000 $ 110,000 $ 70,000 $ 110,000 $ 305,000 Required: 1. Prepare a traditional income statement for the quarter ended March 31. The Alpine House, Inc. Traditional Income Statement Selling and administrative expenses

Answer 1

1. Number of pairs of ski sold = $ 1,240,000 / 400 = 3,100

The Alpine House Inc. Traditional Income Statement
	$	$
Sales Revenue		1,240,000
Less: Cost of Goods Sold
Beginning Merchandise Inventory	70,000
Add: Merchandise Purchases	305,000
Less: Ending Merchandise Inventory	(110,000)	265,000
Gross Profit		975,000
Less: Selling and Administrative Expenses
Variable Selling Expenses ( 3,100 x $ 50)	155,000
Fixed Selling Expenses	150,000
Variable Administrative Expenses ( 3,100 x 20)	62,000
Fixed Administrative Expenses	110,000
Total Selling and Administrative Expenses		477,000
Net Operating Income		$ 498,000

2.

The Alpine House Inc. Contribution Margin Income Statement
	$	$
Sales Revenue		1,240,000
Less: Variable Expenses
Cost of Goods Sold	265,000
Selling Expenses	155,000
Administrative Expenses	62,000
Total Variable Expenses		482,000
Contribution Margin		758,000
Fixed Costs
Selling	150,000
Administrative	110,000
Total Fixed Costs		260,000
Net Operating Income		$ 498,000

3. Contribution of each pair of skis : $ 245.

Unit contribution margin = $ 758,000 / 3,100 = $ 244.52