Question

Polarix is a retailer of ATVs (all-terrain vehicles) and accessories. An income statement for its Consumer ATV Department for the current year follows. ATVs sell for $3,800 each. Variable selling expenses are $310 per ATV. The remaining selling expenses are fixed. Administrative expenses are 50% variable and 50% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,860 each. POLARIX Income Statement-Consumer ATV Department For Year Ended December 31, 2017 Sales $619,400 Cost of goods sold 303,180 Gross margin 316,220 Operating expenses Selling expenses $140,000 Administrative expenses 41,100 181,100 Net income $135, 120

Answer 1

Income statement-consumer ATV department
sales				619400
less: variable cost:
cost of goods sold			303180
selling expenses (163*310)			50530
administrative expenses (41100*50%)			20550
Total variable expenses				374260
Contribution margin				245140
less: fixed expenses
Fixed administrative expenses			20550
Fixed selling expenses (140000-50530)			89470
Total fixed expenses				110020
Net income (loss)				135120
No of AVT sold = total sale/per unit selling price
no of AVT sold = 619400/3800 = 163
Contribution margin per ATV = total contribution /no of ATV sold
2) Contribution margin per ATV = 245140/163 = 1504