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 $1,394,000 410 46 Ş 18 Total sales revenue 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 $ 145,000 $ 125,000 $ 65,000 $ 105,000 $ 300,000 Required: 1. Prepare a traditional income statement for the quarter ended March 31. $ 1,394,000 The Alpine House, Inc. Traditional Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Net operating income

Answer 1

Answer to Requirement 1. The Alpine House, Inc. Traditional Income Statement Sales Cost of Goods Sold Gross Margin Selling and Administrative Expenses: Selling Expenses Administrative Expenses Total Selling and Administrative Expenses Net Operating Income 1,394,000 260,000 1,134,000 301,400 186,200 487,600 646,400 Calculation: Units Sold = $1,394,000 / $410 = 3,400 skis Cost of Goods Sold = Beginning Inventory + Merchandise Purchases - Ending Inventory Cost of Goods Sold = $65,000 + $300,000 - $105,000 = $260,000 Selling Expenses = $145,000 + ($46 * 3,400) = $301,400 Administrative Expenses = $125,000 + ($18 * 3,400) = $186,200

Answer to Requirement 2. The Alpine House, Inc. Contribution Format Income Statement 1,394,000 260,000 156,400 61,200 Sales Variable Expenses: Cost of Goods Sold Selling Expenses Administrative Expenses Total Variable Expenses Contribution Margin Fixed Expenses: Selling Expenses Administrative Expenses Total Fixed Expenses Net Operating Income 477,600 916,400 145,000 125,000 270,000 646,400 Calculation: Units Sold = $1,394,000 / $410 = 3,400 skis Cost of Goods Sold = Beginning Inventory + Merchandise Purchases - Ending Inventory Cost of Goods Sold = $65,000 + $300,000 - $105,000 = $260,000 Selling Expenses = $46 * 3,400 = $156,400 Administrative Expenses = $183,400 = $61,200

Answer to Requirement 3:
Contribution Margin per Unit = Selling Price per Unit - Variable Cost per Unit
Cost of Goods Sold per Unit = $260,000 / 3,400 = $76.47
Variable Cost per Unit = $76.47 + $46 + $18 = $140.47
Contribution Margin per Unit = $410 - $140.47
Contribution Margin per Unit = $269.53 or $270