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	$	1,012,000
Selling price per pair of skis	$	440
Variable selling expense per pair of skis	$	48
Variable administrative expense per pair of skis	$	18
Total fixed selling expense	$	140,000
Total fixed administrative expense	$	110,000
Beginning merchandise inventory	$	75,000
Ending merchandise inventory	$	105,000
Merchandise purchases	$	305,000

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

Units sold = Sales / Selling price per pair of skis = 1012000 / 440 =

2300

Beginning merchandise inventory	75000
(+) Merchandise purchases	305000
(-) Ending merchandise inventory	105000
Cost of goods sold	275000

Required 1 :
The Alpine House, Inc.
Traditional Income Statement
Sales		1012000
Cost of goods sold		275000
Gross margin		737000
Selling and administrative expenses:
Selling expense [ ( 2300 * 48 ) + 140000 ]	250400
Administrative expenses [ ( 2300 * 18 ) + 110000 ]	151400
		401800
Net operating income		335200

Required 2 :
The Alpine House, Inc.
Contribution format Income Statement
Sales		1012000
Variable expenses :
Cost of goods sold	275000
Selling expenses ( 2300*48 )	110400
Administrative expenses ( 2300*18 )	41400
		426800
Contribution margin		585200
Fixed expenses :
Selling expense	140000
Administrative expense	110000
		250000
Net operating income		335200

Required 3 :
Contribution of each pair of skis was = Total contribution margin / Units sold = 585200 / 2300 =	254