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 $4,000 each. Variable selling expenses are $220 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 $1,830 each. POLARIX Income Statement-Consumer ATV Department For Year Ended December 31 Sales $676,000 Cost of goods sold 309,270 Gross margin 366,730 Operating expenses Selling expenses $140,000 Administrative expenses 42,100 182, 100 Net income $184,630

Answer 1

Based on the information available in the question, we can answer as follows:-

Requirement 1:-

1.) No. of ATVs sold = Total revenue/Sales price per ATV = $676,000/$4,000 = 169 ATVs

2.) Variable selling expenses = $220 per ATV * 169 ATVs = $37,180

3.) Variable Administrative expenses = $42,100 * 50% = $21,050

4.) Fixed Administrative expenses = $42,100 - $21,050 = $21,050

5.) Fixed selling expenses = $140,000 - $37,180 = $102,820

Polarix
Contribution Margin Income Statement
	Amount	Amount
Revenues
Sales		676,000
Variable expenses
Cost of goods sold	309,270
Variable Selling Expenses	37,180
Variable Administrative expenses	21,050
Total Variable expenses		(367,500)
Contribution Margin(Revenue - Variable expenses)		308,500
Fixed Expenses
Administrative expenses	21,050
Selling expenses	102,820
Total Selling and Administrative expenses		(123,870)
Net Income (loss)		184,630

Requirement 2:-

The contribution margin per ATV is calculated as:-

=Total contribution margin/No.of units sold

=$308,500/169 ATVs

Contribution margin per ATV=$1,825.45

Contribution Margin per ATV = $1,825 (Rounded)