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	$	1,376,000
Selling price per pair of skis	$	430
Variable selling expense per pair of skis	$	47
Variable administrative expense per pair of skis	$	15
Total fixed selling expense	$	150,000
Total fixed administrative expense	$	110,000
Beginning merchandise inventory	$	70,000
Ending merchandise inventory	$	110,000
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?

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

	The Alpine House, Inc. Traditional Income Statement Selling and administrative expenses:

Answer 1

Number of units sold = $1,376,000/$430 = 3,200 units

1.

The Alpine House, Inc. Traditional Income Statement
Sales		$1,376,000
Cost of goods sold ($70,000+295,000-110,000)		255,000
Gross margin		1,121,000
Selling and administrative expenses:
Selling expenses (3,200*$47+$150,000)	$300,400
Administrative expenses (3,200*$15+$110,000)	158,000	458,400
Net operating income		$662,600

2.

The Alpine House, Inc. Contribution Margin Income Statement
Sales		$1,376,000
Variable expenses:
Variable cost of goods sold	$255,000
Variable selling expenses (3,200*$47)	150,400
Variable administrative expenses (3,200*$15)	48,000	453,400
Contribution margin		922,600
Fixed expenses:
Fixed selling expenses	150,000
Fixed administrative expenses	110,000	260,000
Net operating income		$662,600

3.

Contribution margin per unit = $922,600 / 3,200 = $288.3125