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:The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:

Sales	$1,125,000
Selling price per pair of skies	$450
Variable selling expense per pair of skis	$48
Variable administrative expense per pair of skis	$18
Total fixed selling expense	$145,000
Total fixed administrative expense	$120,000
Beginning merchandise inventory	$60,000
Ending merchandise inventory	$115,000
Merchandise purchases	$305,000

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

Alpine House
Traditional Income statement
Sales		1125000
Less: Cost of goods sold		250000
Gross Margin		875000
Selling & Admin. Expenses:
Fixed Selling Exp.	145000
Fixed Admin Exp.	120000
VAriable Selling Exp. (48*2500)	120000
Variable Admin Exp. (18*2500)	45000	430000
Operating Income		445000
Working Note:
Cost of Goods Sold
Opening Inventory	60000
Add: Purchase	305000
Less: Closing Inventory	-115000
Cost of Goods Sold	250000
NO. of units Sold
Sales	1125000
Selling Price Per Unit	450
No. of Units Sold	2500
Alpine House
Contribution Format Income statement
Sales		1125000
Less: Variable Expenses:
Cost of Goods Sold	250000
Variable Selling Exp.	120000
Variable Admin Exp.	45000	415000
Contribution		710000
Fixed Expenses:
Fixed Selling Exp.	145000
Fixed Admin Exp.	120000	265000
Operating Income		445000
Contribution Margin Per Unit	(710000/2500)	284