Question

4. 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 166,400 208 pairs 800 42 10 Sales Sales in units 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 USA 23,000 28.000 40,000 30,000 115,000 $ Note: to calculate COGS you will need to use the following equation: Beg. Merch. Inventory + Merch. Purchases - End. Merch. Inventory COGS is a variable expense 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

1.Traditional income statement for the quarter ended March 31

Sales		$166,400
Less: Cost of goods sold		($125,000)
Gross margin		$41,400
Selling and administrative expense
Selling expenses(208×$42 +$23,000)	$31,736
Administrative expense(208×$10 +$28,000)	$30,080	($61,816)
Net operating income (Loss)		($20,416)

* Cost of goods sold= Beginning merchandise inventory+ Merchandise purchase- Ending merchandise inventory

=$40,000+$115,000-$30,000 =$125,000

2. Contribution format income statement

Sales		$166,400
Less: Variable expenses
Cost of goods sold	$125,000
Selling expenses (208×$42)	$8,736
Administrative expense (208×$10)	$2,080
		($135,816)
Contribution margin		$30,584
Less: Fixed expenses
Selling expenses	$23,000
Administrative expense	$28,000
		($51,000)
Net income (Loss)		($20,416)

3. Contribution margin per unit = contribution margin / Quantity

= $30,584/208

=$147.03

____×____

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