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	$	1,320,000
Selling price per pair of skis	$	400
Variable selling expense per pair of skis	$	46
Variable administrative expense per pair of skis	$	15
Total fixed selling expense	$	155,000
Total fixed administrative expense	$	125,000
Beginning merchandise inventory	$	80,000
Ending merchandise inventory	$	120,000
Merchandise purchases	$	315,000

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 Inc
Traditional Format Income Statement
Sales		$ 13,20,000.00
Cost of goods sold		$    2,75,000.00
Gross margin		$ 10,45,000.00
Selling and administrative expenses:
Selling expenses	$   3,06,800.00
Administrative expenses	$   1,74,500.00
Total selling and administrative expenses		$    4,81,300.00
Net operating income		$      5,63,700.00

Alpine House Inc
Contribution margin Income statement
Sales		$   13,20,000.00
Less: Variable costs
Direct material used	$    2,75,000.00
Variable selling expenses	$    1,51,800.00
Variable administrative expenses	$        49,500.00
Total Variable cost		$      4,76,300.00
Contribution margin		$      8,43,700.00
Less: Fixed Costs
Fixed selling expenses'	$    1,55,000.00
Fixed administrative expenses	$    1,25,000.00
Total Fixed Costs		$      2,80,000.00
Net Income		$      5,63,700.00

Sales	$ 13,20,000.00
Sales price	$              400.00
Units sold (1320000/400)	3,300

Sales price	$     400.00
Variable material cost (275000/3300)	$       83.33
Variable selling expenses	$       46.00
Variable administrative expenses	$       15.00
Contribution margin Per unit (400-83.33-46-15)	$     255.67