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 $ 1,394,000 Selling price per pair of skis $ 410 Variable selling expense per pair of skis $ 48 Variable administrative expense per pair of skis $ 16 Total fixed selling expense $ 135,000 Total fixed administrative expense $ 110,000 Beginning merchandise inventory $ 65,000 Ending merchandise inventory $ 105,000 Merchandise purchases $ 315,000

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

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

C. What was the contribution margin per unit?

Answer 1

	Traditional income statement
Sales		1394000
Cost of goods sold		275000	=315000+65000-105000
Gross margin		1119000
Selling and administrative expenses:
Selling expenses	298200		=135000+(3400*48)
Administrative expenses	164400		=110000+(3400*16)
		462600
Net operating income		656400
2
	Contribution format income statement
Sales		1394000
Variable expenses:
Cost of goods sold	275000
Selling expenses	163200		=3400*48
Administrative expenses	54400		=3400*16
		492600
Contribution margin		901400
Fixed expenses:
Selling expenses	135000
Administrative expenses	110000
		245000
Net operating income		656400
3
Contribution margin per unit = 901400/3400= $265
Note: Sales units = 1394000/410 = 3400