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	$	150,000
Selling price per pair of skis	$	750
Variable selling expense per pair of skis	$	50
Variable administrative expense per pair of skis	$	10
Total fixed selling expense	$	20,000
Total fixed administrative expense	$	20,000
Beginning merchandise inventory	$	30,000
Ending merchandise inventory	$	40,000
Merchandise purchases	$	100,000

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

Requirement 1 The Alpine House Inc. Traditional Income Statement Less 150,000 90,000 60,000 $ Sales Revenue Cost of goods sold Gross profit Selling & Administrative Expenses: Selling Expenses Administrative Expenses Net Operating Income 30,000 22,000 $ $ $ 52,000 8,000 Sales / Selling Price per pair = number of pairs = 150000/750 = 200 pair of skis Cost of goods sold = Beginning Bal + Purchases - Ending Bal = 30000 + 100000 - 40000 = 90000 Selling Expense = Variable + Fixed = (50 x 200 units) + 20000 = 30000 Administrative Expense = Variable + Fixed = (10 x 200 units) + 20000 = 22000 Requirement 2 The Alpine House Inc. Contribution format Income Statement $ 150,000 90.000 10,000 2,000 Sales Revenue Variable Expenses | Cost of Goods Sold Selling Expenses Administrative Expenses Contribution Margin Fixed Expenses Selling Expenses Administrative Expenses Net Operating Income $ $ 102,000 48,000 $ $ 20,000 20,000 $ $ 40,000 8,000 Variable Selling Expense = (50 x 200 units ) = 10000 Variable Administrative Expense = (10 x 200 units ) = 2000 Requirement 3 Contribution Margin per unit = Total Contribution Margin / Total Units = 48000 / 200 = $240.