Question

he 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	$	1,066,000
Selling price per pair of skis	$	410
Variable selling expense per pair of skis	$	47
Variable administrative expense per pair of skis	$	18
Total fixed selling expense	$	155,000
Total fixed administrative expense	$	120,000
Beginning merchandise inventory	$	75,000
Ending merchandise inventory	$	115,000
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 margin per unit?

Answer 1

Ans. 1	Alpine House, Inc.
	Traditional Income Statement
	For the Quarter Ended March 31
	Particulars	Amount	Amount
	Sales		$1,066,000
	Cost of goods sold		-$270,000
	Gross margin		$796,000
	Selling and Administrative expenses:
	Variable selling expenses	$122,200
	Fixed selling expenses	$155,000
	Variable Administrative expenses	$46,800
	Fixed Administrative expenses	$120,000
	Total selling and administrative expenses		$444,000
	Net operating income		$352,000
Ans. 2	Alpine House, Inc.
	Contribution Format Income Statement
	For the Quarter Ended March 31
	Particulars	Amount	Amount
	Sales		$1,066,000
	Variable expenses:
	Cost of goods sold	$270,000
	Selling expenses	$122,200
	Administrative expenses	$46,800
	Total variable expenses		$439,000
	Contribution margin		$627,000
	Fixed expenses:
	Selling expenses	$155,000
	Administrative expenses	$120,000
	Total fixed expenses		$275,000
	Net operating income		$352,000
Ans. 3	Contribution margin per unit = Contribution margin / Number of units sold
	$627,000 / 2,600
	$241 per unti	(rounded)
	* WORKING NOTES:
	Cost of goods sold = Beginning inventory + Merchandise purchases - Ending inventory
	$75,000 + $310,000 - $115,000
	$270,000
	Number of units sold    =    Sales / Selling price
	$1,066,000 / $410
	2600
	*Variable selling expenses = Number of units sold * Variable selling expenses per pair of skis
	2,600 * $47
	$122,200
	*Variable administrative expenses = Number of units sold * Variable administrative expenses per pair of skis
	2,600 * $18
	$46,800