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	$	1,408,000
Selling price per pair of skis	$	440
Variable selling expense per pair of skis	$	50
Variable administrative expense per pair of skis	$	16
Total fixed selling expense	$	150,000
Total fixed administrative expense	$	115,000
Beginning merchandise inventory	$	75,000
Ending merchandise inventory	$	115,000
Merchandise purchases	$	285,000

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

1. Prepare a traditional income statement for the quarter ended March 31.

Sales		1408000
Less: Cost of goods sold (75000+285000-115000)		(245000)
Gross profit		1163000
Less: Selling and administrative expenses
Selling expenses (150000+3200*50)	(310000)
Administrative expenses (115000+3200*16)	(166200)	(476200)
Net operating income		686800

2. Prepare a contribution format income statement for the quarter ended March 31.

Sales		1408000
Less: Variable cost of goods sold	(245000)
Less: Variable selling expenses (3200*50)	(160000)
Less: Variable administrative exp (3200*16)	(51200)	(456200)
Contribution margin		951800
Less: Fixed selling expenses	(150000)
Less: Fixed administrative exp	(115000)	(265000)
Net operating income		686800

3. Contribution margin per unit = Contribution margin/unit sold = 951800/3200 = 297.4375 per unit