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 $3,400 each. Variable selling expenses are $240 per ATV. The remaining selling expenses are fixed. Administrative expenses are 60% variable and 40% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,870 each. POLARIX Income Statement—Consumer ATV Department For Year Ended December 31 Sales $ 676,600 Cost of goods sold 372,130 Gross margin 304,470 Operating expenses Selling expenses $ 155,000 Administrative expenses 42,800 197,800 Net income $ 106,670 Required:

1. Prepare an income statement for the current year using the contribution margin format. (Do not round intermediate calculations. Round contribution margin per ATV value to the nearest whole number.)

Answer 1

Answer:- 1.Number of ATV sold = Sales Revenue /selling price per ATV

= $676600/$3400

=$199

2.Variable administrative Expenses = $42800 × 60%

= $25680

3. Fixed administrative Expenses = $42800 × 40%

= $17120

4. Variable selling Expenses = $240 × $199

= $47760

5. Fixed selling Expenses = Total selling expenses - variable selling expenses

=$155000 - $47760

= $107240

Income statement

Sales. $676600

Variable expenses:-

Cost of good sold. $372130

Variable administrative expenses $25680

Variable selling expenses $47760

Total variable expenses. $445570

Contribution Margin. $231030

Fixed Expenses:-

Fixed administrative Expenses $17120

Fixed selling Expenses. $107240

Total Fixed Expenses $124360

Net Income. $106670

2. Contribution Margin per ATV = Total contribution Margin/ Number of ATV Sold

= $231030/ $199

=$1161