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Polarix is a retailer of ATVs (al-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 S310 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 S1,910 each. POLARIX ncome Statement-Consumer ATV Department For Year Ended December 31, 2015 676,000 Sales Cost of goods sold 322,790 Gross margin 353.210 Operating expenses 140,000 Selling expenses Administrative expenses 40,500 180,500 Net income S 172,710 Required 1. Prepare an income statement for this current year using the contribution margin format. POLARIX Income Statement Consumer ATV Department For Year Ended December 31, 2015 Sales Less: Variable expenses Variable administrative expenses Variable cost of goods sold Variable selling expenses Total variable expenses Contribution margin Less: Fixed expenses Fixed administrative expenses Fixed selling expenses Net income (loss) For each ATV sold during this year, what is the contribution toward overing fixed expenses and earning income? Contribution margin per ATV

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Answer #1

(1) Contribution Margin Income Statement :-

Sales (4000 * 169 ATV)

676000

Less: Variable Exp :-

Variable Admn Exp (40500 * 50%)

20250

Variable COGS (1910 * 169 ATV)

322790

Variable Selling Exp (310 * 169 ATV)

52390

Total Variable Exp

395430

Contribution Margin

280570

Less: Fixed Exp:-

Fixed Admn Exp (40500 * 50%)

20250

Fixed Selling Exp (140000 – 52390)

87610

Total Fixed Exp

107860

Net Income/(Loss)

172710

(2) Contribution Margin per ATV = Total contribution/No of ATV sold

      Total contribution = 280570

      No of ATV sold = 169

      Contribution margin per ATV = 280570/169 = $ 1660.18

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