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	$	1,462,000
Selling price per pair of skis	$	430
Variable selling expense per pair of skis	$	49
Variable administrative expense per pair of skis	$	18
Total fixed selling expense	$	145,000
Total fixed administrative expense	$	115,000
Beginning merchandise inventory	$	80,000
Ending merchandise inventory	$	100,000
Merchandise purchases	$	295,000

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 Alpine Inc.
	Amount	Amount
Sales Unit ($1462000/$430 ( In Unit)	3400
Sales		$1,462,000.00
Less: Merchandise Cost incurred (Working Note-1)		-$275,000.00
Gross Margin		$1,187,000.00
Less: Selling Expense ( Working Note-2)		-$311,600.00
Administrative Expense ( Wrking Note-3)		-$176,200.00
Net Operating Income		$699,200.00
2.. Income Statement ( Contribution Format) for The Alpine Inc. Amount Amount Sales Unit ($1462000/$430 ( In Unit) 3400 Sales (1) $1,462,000.00 Variable Expense (2) Merchandise Cost incurred (Working Note-1) $275,000.00 Variable Selling Expense @ $49/Unit $166,600.00 Variable Admininstration Expense @ $18/Unit $61,200.00 Total Variable Expense $502,800.00 Contribution Margin 3=(1-2) $959,200.00 Fixed Expense (4) Fixed Administrative Expense $115,000.00 Fixed Selling Expense $145,000.00 $260,000.00 Net Operating Income ( loss) (3-4) $699,200.00 3. Computation of Contribution Margin/Unit Total Contribution for 3400 Unit 959200 Unit 3400 Contribution/Unit 282.1176471 Working Note-1 Calculation of Merchandised Cost incurred =Opening Inventory+ Purchase- Closing Inventory =80000+295000-100000 =$275000 Working Note-2 Calculation of Selling Expense Variable Selling expense + Fixed Selling Expense ($49*3400 Unit)+$145000 =$311600 Working Note-2 Calculation of Administrative Expense Variable Admin Expense + Fixed Admin Expense ($18*3400 Unit)+$115000 =$176200