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 $ 1,435,000 Selling price per pair of skis $ 410 Variable selling expense per pair of skis $ 50 Variable administrative expense per pair of skis $ 18 Total fixed selling expense $ 150,000 Total fixed administrative expense $ 115,000 Beginning merchandise inventory $ 65,000 Ending merchandise inventory $ 110,000 Merchandise purchases $ 290,000 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 traditional income statement for the quarter ended March 31.
		Amount in $
Sales		1435000
Less: Cost of goods Sold		245000
gross margin		1190000
less: Selling & Admin Expenses
Selling Expenses	325000
Administrative Expenses	178000
		503000
Net operating Income		687000
Cost of goods sold = Opening merchandise + Purchases - Closing Merchandise =$65000+$290000-$110,000 =$245,000
Total pairs of skis = Total sales / Per pair skis price =$1435000/$410 =3500
Selling Expenses =$50*3500+ $150,000 =325000
Administrative Expenses =$18*3500 +$115000 =$178,000
2 contribution format income statement for the quarter ended March 31.
Sales		1435000
less: Variable Expenses
Cost of goods sold	245000
Selling expenses	175000
Administrative Expenses	63000
		483000
Contribution margin		952000
Less: Fixed Expenses
Selling expenses	150000
Administrative Expenses	115000
		265000
Net operating income		687000
Cost of goods sold = Opening merchandise + Purchases - Closing Merchandise =$65000+$290000-$110,000 =$245,000
Selling Expenses =$50*3500=$175000
Administrative Expenses =$18*3500 =$63000
3 the contribution margin per unit?
Total contribution margin	$952000
Total number of pairs	3500
Contribution margin per pair ($952,000/3500)=$272