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	$	1,218,000
Selling price per pair of skis	$	420
Variable selling expense per pair of skis	$	47
Variable administrative expense per pair of skis	$	18
Total fixed selling expense	$	140,000
Total fixed administrative expense	$	105,000
Beginning merchandise inventory	$	75,000
Ending merchandise inventory	$	105,000
Merchandise purchases	$	310,000

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

$1,218,000 $ 280,000 $ 938,000 The Alpine House, Inc. Tradional Income Statement Sales Cost of Goods Sold Gross Profit Selling and administrative expenses: Variable Selling expenses $ 136,300 Variable administrative Expenses $ 52,200 Fixed Selling expenses $ 140,000 Fixed administrative Expenses $ 105,000 Net Income $ 433,500 $ 504,500 $1,218,000 The Alpine House, Inc. Contribution Format Income Statement Sales Variable Expenses : Variable Cost of Goods Sold $ 280,000 Variable Selling expenses $ 136,300 Variable administrative Expenses $ 52,200 Contribution Margin Fixed Expenses : Fixed Selling expenses $ 140,000 Fixed administrative Expenses $ 105,000 Net Income $ 468,500 $ 749,500 $ 245,000 $ 504,500

Working Notes: Selling Units = total sales revenue / Selling price Total selling Units = $1,218,000/420 = 2,900 Units Variable Cost of Goods sold = Beginning Inventory+Merchandise Purchases -Ending inventory = $75,000+$310,000-$105,000 = $280,000 Variable Selling expenses = 2,900*$47 = $136,300 Variable administrative expenses = 2.900*$18 = $52,200 3 Contribution Margin per unit $ 258 Contribution per surfboard = Contribution Margin / Selling units = $749,500/2,900 = $258