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 $ 1,050,000

Selling price per pair of skis $ 420

Variable selling expense per pair of skis $ 46

Variable administrative expense per pair of skis $ 16

Total fixed selling expense $ 150,000

Total fixed administrative expense $ 125,000

Beginning merchandise inventory $ 70,000

Ending merchandise inventory $ 115,000

Merchandise purchases $ 295,000

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

Soution

Alpine House Inc
Traditional Format Income Statement
Sales		$ 1,050,000
Cost of goods sold		$ 250,000
Gross margin		$ 800,000
Selling and administrative expenses:
Selling expenses	$ 265,000
Administrative expenses	$ 165,000
Total selling and administrative expenses		$ 430,000
Net operating income		$ 370,000

.

Alpine House Inc
Contribution margin Income statement
Sales		$ 1,050,000
Less: Variable costs
Direct material used	$ 250,000
Variable selling expenses	$ 115,000
Variable administrative expenses	$ 40,000
Total Variable cost		$ 405,000
Contribution margin		$ 645,000
Less: Fixed Costs
Fixed selling expenses	$ 150,000
Fixed administrative expenses	$ 125,000
Total Fixed Costs		$ 275,000
Net Income		$ 370,000

.

Contribution margin

$     258.00

Working

Sales price	$     420.00
Variable material cost (250000/2500)	$     100.00
Variable selling expenses	$       46.00
Variable administrative expenses	$       16.00
Contribution margin (420-100-46-16)	$     258.00