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: Sales Selling price per pair of skis Variable selling expense per pair of skis Amount 840,000 420 Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases es es es es es es es es es 135,000 100,000 70,000 115,000 285,000 Required: 2. Prepare a contribution format income statement for the quarter ended March 31. 3. What was the contribution margin per unit?

Answer 1

$ 840,000 $ 240,000 $ 600,000 The Alpine House, Inc. Tradional Income Statement Sales Cost of Goods Sold Gross Profit Selling and administrative expenses: Variable Selling expenses $ 98,000 Variable administrative Expenses $ 30,000 Fixed Selling expenses $ 135,000 Fixed administrative Expenses $ 100,000 Net Income $363,000 $ 237,000 The Alpine House, Inc. Contribution Format Income Statement Sales $ 840,000 Variable Expenses : Variable Cost of Goods Sold $ 240,000 Variable Selling expenses $ 98,000 Variable administrative Expenses $ 30,000 $368,000 Contribution Margin $472,000 Fixed Expenses : Fixed Selling expenses $ 135,000 Fixed administrative Expenses $ 100,000 $235,000 Net Income $ 237,000

Working Notes: Selling Units = total sales revenue / Selling price Total selling Units = $840.000/420 = 2000 units Variable Cost of Goods sold = Beginning Inventory+Merchandise Purchases -Ending inventory = $70000+$285000-$115000 = $240,000 Variable Selling expenses = 2,000*$49 = $98,000 Variable administrative expenses = 2,000*$15 = $30,000 3 Contribution Margin per unit $ 236 Contribution per surfboard = Contribution Margin / Selling units = $472,000/2000 = $236