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: ta ta ta ta 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 Amount $ 1,530,000 $ 450 50 18 160,000 $ 115,000 65,000 $ 105,000 $ 310,000 A tA tA 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

Ans. 1 Amount $1,530,000 -$270,000 $1,260,000 Alpine House, Inc. Traditional Income Statement For the Quarter Ended March 31 Particulars Amount Sales Cost of goods sold Gross margin Selling and Administrative expenses: Variable selling expenses $170,000 Fixed selling expenses $160,000 Variable Administrative expenses $61,200 Fixed Administrative expenses $115,000 Total selling and administrative expenses Net operating income $506, 200 $753,800 Ans. 2 Alpine House, Inc. Contribution Format Income Statement For the Quarter Ended March 31 Amount Amount $1,530,000 $270,000 $170,000 $61,200 Particulars 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 $501,200 $1,028,800 $160,000 $115,000 $275,000 $753,800 Ans. 3 Contribution margin per unit = Contribution margin / Number of units sold $1,028,800 / 3,400 $302.59 per unit

* WORKING NOTES:
Cost of goods sold = Beginning inventory + Merchandise purchases - Ending inventory
$65,000 + $310,000 - $105,000
$270,000
Number of units sold    =    Sales / Selling price
$1,530,000 / $450
3400
*Variable selling expenses = Number of units sold * Variable selling expenses per pair of skis
3,400 * $50
$170,000
*Variable administrative expenses = Number of units sold * Variable administrative expenses per pair of skis
3,400 * $18
$61,200