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	$	1,025,000
Selling price per pair of skis	$	410
Variable selling expense per pair of skis	$	49
Variable administrative expense per pair of skis	$	18
Total fixed selling expense	$	150,000
Total fixed administrative expense	$	110,000
Beginning merchandise inventory	$	65,000
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

Sales units	2500		=1025000/410
1
Traditional income statement
Sales		1025000
Cost of goods sold		235000	=65000+285000-115000
Gross margin		790000
Selling and administrative expenses:
Selling expenses	272500		=150000+(2500*49)
Administrative expenses	155000		=110000+(2500*18)
		427500
Net operating income		362500
2
Contribution format income statement
Sales		1025000
Variable expenses:
Cost of goods sold	235000
Selling expenses	122500		=2500*49
Administrative expenses	45000		=2500*18
		402500
Contribution margin		622500
Fixed expenses:
Selling expenses	150000
Administrative expenses	110000
		260000
Net operating income		362500
3
Contribution margin per unit	249		=622500/2500