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	$	946,000
Selling price per pair of skis	$	430
Variable selling expense per pair of skis	$	48
Variable administrative expense per pair of skis	$	17
Total fixed selling expense	$	130,000
Total fixed administrative expense	$	130,000
Beginning merchandise inventory	$	70,000
Ending merchandise inventory	$	120,000
Merchandise purchases	$	280,000

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

Answer
TRADITIONAL INCOME STATEMENT
	Sales	$                     946,000
Less	COGS	$                     230,000	70000+280000-120000
	Profit	$                     716,000
Less	Variable Selling & Admin Exp	$                     143,000	946000/430*(48+17)
Less	Fixed Selling & Admin Exp	$                     260,000
	Net Profit	$                     313,000
	Contribution Format Income Statement
	Sales		$                     946,000
Less	Variable COGS	70000+280000-120000	$                     230,000
Less	Varible Selling Admin Exp	946000/430*(48+17)	$                     143,000
	Contribution Margin		$                     573,000
Less	Fixed Expenses	150000+130000	$                     260,000
	Net Profit		$                     313,000
Contribution per pair = 313000/2200 = 142.27
# no. of pair = 946000/430 = 2200