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
Total sales revenue	$	1,280,000
Selling price per pair of skis	$	400
Variable selling expense per pair of skis	$	49
Variable administrative expense per pair of skis	$	20
Total fixed selling expense	$	150,000
Total fixed administrative expense	$	105,000
Beginning merchandise inventory	$	70,000
Ending merchandise inventory	$	110,000
Merchandise purchases	$	310,000

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 toward fixed expenses and profits for each pair of skis sold during the quarter? (Round your final answer to nearest whole dollar amount.)

     

Garrison 15e Recheck 2014-12-16

Answer 1

Answer : 1.Income statement as per traditional Format  

Sales		$ 1280000
Less - Cost of goods sold		$ 270000
Gross profit		$ 1010000
Less : Variable selling expensee ( $ 49*3200)	$ 156800
Variable administrative expenses ( $ 20 *3200)	$ 64000
Fixed selling expenses	$ 150000
Fixed Adminstrative Expenses	$ 105000	$ 475800
Net Income		$ 534200

Working note - 1

COGS = opening inventory + purchase - closing inventory

= $ 70000 + $ 310000 - $ 110000 = $ 270000

Number of sales unit = $ 1280000/$ 400 = 3200 unit

2. Income statement as per contribution Format

Sales		$ 1280000
Less - Variable expenses
Cost of goods sold	$ 270000
Variable selling expensee ( $ 49*3200)	$ 156800
Variable administrative expenses ( $ 20 *3200)	$ 64000	$ 490800
Contribution		$ 789200
Less -Fixed Expenses
Fixed selling Expenses	$ 150000
Fixed Adminstrative Expenses	$ 105000	$ 255000
Operating Income		$ 534200

3. Contribution toward fixed expenses and profits for each pair of skis sold

= Total contribution / number of unit sold

= $ 789200/ 3200 = $ 246.625