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
Sales	$	860,000
Selling price per pair of skis	$	430
Variable selling expense per pair of skis	$	48
Variable administrative expense per pair of skis	$	18
Total fixed selling expense	$	150,000
Total fixed administrative expense	$	100,000
Beginning merchandise inventory	$	60,000
Ending merchandise inventory	$	110,000
Merchandise purchases	$	295,000

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

Answer requirements as follows: 5 A B D 1 1 Traditional Income Statement 2 Sales $8,60,000 3 Cost of goods sold $2.45,000 4 Gross margin $6,15,000 5 Selling and administrative expenses: 6 Selling $ 2,46,000 7 Administrative $1,36,000 8 $3,82,000 9 Net Income $2,33,000 10 11 2 Contribution Format Income Statement 12 Sales $8,60,000 13 Variable Expenses: 14 Manufacturing $2,45,000 15 Selling $ 96,000 16 Administrative $ 36,000 17 Contribution margin $4,83,000 18 Fixed Expenses 19 Selling $1,50,000 20 Administrative $1,10,000 $2,60,000 21 22 Net income $2,23,000 23 24 3 Contribution margin per unit $ 241.50

Calculations: D A 1 1 2 3 20 B с Traditional Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling =(D2/430*48)+150000 Administrative =(D2/430*18)+100000 860000 =60000+295000-110000 =D2-D3 4 5 6 7 8 =C6+C7 =D4-D8 Net Income Contribution Format Income Statement 860000 9 10 11 2 12 13 14 15 16 17 18 19 20 21 22 23 24 3 Sales Variable Expenses: Manufacturing Selling Administrative Contribution margin Fixed Expenses Selling Administrative 245000 =(860000/430*48) =(860000/430*18) =D12-C14-C15-C16 150000 110000 =C19+C20 Net income =D17-D20 Contribution margin per unit =D17/(860000/430)