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	$	861,000
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	$	130,000
Beginning merchandise inventory	$	75,000
Ending merchandise inventory	$	110,000
Merchandise purchases	$	295,000

Required:

1. Prepare a traditional income statement for the quarter ended March 31.

	The Alpine House, Inc. Traditional Income Statement Sales $861,000 Cost of goods sold Gross margin Selling and administrative expenses: 0

2. Prepare a contribution format income statement for the quarter ended March 31.

	The Alpine House, Inc. Contribution Format Income Statement Variable expenses: 0 Fixed expenses: 0

3. What was the contribution margin per unit?

Answer 1

1.

Alpine House, Inc.
Traditional Income Statement
	$	$
Sales		861,000.00
Less: Cost of goods sold		260,000.00
(75,000+295,000-110,000)
Gross Margin		601,000.00
Less:Selling and Administrative expenses:
Selling Expenses ((($49 per unit × 410 units) + $150,000)	170,090.00
Administrative Expense ((($18 per unit × 410 units) + $130,000)	137,380.00	307,470.00
Net operating Income		293,530.00

2.

Alpine House, Inc.
Contribution format Income Statement
	$	$
Sales		861,000.00
Less: Variable Expenses:
Cost of goods sold	260,000.00
(75,000+295,000-110,000)
Selling Expenses ($49 per unit × 410 units)	20,090.00
Administrative Expense ($18 per unit × 410 units)	7,380.00
Total Variable Expense		287,470.00
Contribution Margin (Sales-Variable expense)		573,530.00
Less: Fixed Expenses
Selling Expense	150,000.00
Administrative Expense	130,000.00
Total Fixed Expense		280,000.00
Net operating Income		293,530.00

3. Contribution margin per unit = Selling price - Variable cost per unit

= 410 - (49 + 18)

= 410 - 67

= 343 per unit