Question

Exercise 19-8 Contribution margin format income statement LO P2

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 $3,800 each. Variable selling expenses are $250 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 $1,890 each.

POLARIX Income Statement—Consumer ATV Department For Year Ended December 31, 2017
Sales				$	646,000
Cost of goods sold					321,300
Gross margin					324,700
Operating expenses
Selling expenses	$	135,000
Administrative expenses		41,300			176,300
Net income				$	148,400

Required:

1. Prepare an income statement for this current year using the contribution margin format. (Round contribution margin per ATV to the nearest dollar amount.)

	POLARIX Income Statement - Consumer ATV Department For Year Ended December 31, 2017 0 0 Net income (loss) 2. For each ATV sold during this year, what is the contribution toward covering fixed expenses and earning income? Contribution margin per ATV:

Answer 1

POLARIX
Income Statement - Consumer ATV Department
For Year Ended December 31, 2017
Sales		$ 646,000
Less: Variable expenses
Variable cost of goods sold	$ 321,300
Variable selling expenses ($646,000/$3,800*$250)	$    42,500
Variable administrative expenses ($41,300*50%)	$    20,650
Total variable expenses		$ 384,450
Contribution margin		$ 261,550
Less: Fixed expenses
Fixed selling expenses ($135,000-$42,500)	$    92,500
Fixed administrative expenses ($41,300*50%)	$    20,650
Total fixed expenses		$ 113,150
Net income		$ 148,400

Contribution margin	$ 261,550
Number of unit sold ($646,000/$3,800)	170
Contribution margin per unit ($261,550/170)	$      1,539

You can reach me over comment box if you have any doubts. Please rate this answer