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 $ 1,012,000 440 46 Sales 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 $ $ $ $ $ 16 140,000 115,000 75,000 105,000 285,000 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) The Alpine House, Inc. Traditional Income Statement Sales ($1,012.000 / $440 = 2,300 pairs of skis) Less: Cost of goods sold Gross margin Less: Selling and administrative expenses: Selling expenses Administrative expenses $1,012.000 $255,000 $757.000 $245,800 $151.800 $397,600 $359,400 Net Operating Income Workings: Cost of goods sold = Beginning merchandise inventory + Merchandise purchases - Ending merchandise inventory = $75,000 + $285,000 - $105,000 = $255,000 Selling expenses = Variable selling expense + Fixed selling expense = [($46 per pair * 2,300 pairs of skis) + $140.000] = $245,800 Administrative expenses = Variable Administrative expense + Fixed Administrative expense = [(S16 per pair * 2,300 pairs of skis) + $115,000] = $151,800 $1.012,000 The Alpine House, Inc. Contribution Formate Income Statement Sales Variable expenses: Cost of goods sold $255,000 Selling expenses (S46 per pair + 2,300 pairs) $105,800 Administrative expenses ($16 per pair + 2,300 pairs) $36,800 $397,600 $614,400 Contribution margin Fixed expenses: Selling expenses Administrative expenses $140,000 $115,000 $255,000 $359,400 Net Operating Income Contribution margin per unit = Contribution Margin/No. of unit sold = $614.400 / 2,300 $267