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:

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

1. Traditional income statement

The Alpine House, Inc.

Traditional Income Statement

Sales		$150,000
Cost of goods sold ($30,000 + $100,000 – $40,000)		90,000
Gross margin		60,000
Selling and administrative expenses:
Selling expenses (($50 per unit × 200 pairs of skis*) + $20,000)	$30,000
Administrative expenses (($10 per unit × 200 *pairs of skis) + $20,000)	22,000	52,000
Net operating income		$ 8,000

*$150,000 sales ÷ $750 per pair of skis = 200 pairs of skis

2. Contribution format income statement

The Alpine House, Inc.

Contribution Format Income Statement

Sales		$150,000
Variable expenses:
Cost of goods sold ($30,000 + $100,000 – $40,000)	$90,000
Selling expenses ($50 per unit × 200 pairs of skis)	10,000
Administrative expenses ($10 per unit × 200 pairs of skis)	2,000	102,000
Contribution margin		48,000
Fixed expenses:
Selling expenses	20,000
Administrative expenses	20,000	40,000
Net operating income		$ 8,000

3. Since 200 pairs of skis were sold and the contribution margin totaled $48,000 for the quarter, the contribution margin per unit was $240 ($48,000 ÷ 200 pair of skis = $240 per pair of skis). 

1. Traditional income statement

The Alpine House, Inc.

Traditional Income Statement

Sales		$150,000
Cost of goods sold ($30,000 + $100,000 – $40,000)		90,000
Gross margin		60,000
Selling and administrative expenses:
Selling expenses (($50 per unit × 200 pairs of skis*) + $20,000)	$30,000
Administrative expenses (($10 per unit × 200 *pairs of skis) + $20,000)	22,000	52,000
Net operating income		$ 8,000

*$150,000 sales ÷ $750 per pair of skis = 200 pairs of skis

2. Contribution format income statement

The Alpine House, Inc.

Contribution Format Income Statement

Sales		$150,000
Variable expenses:
Cost of goods sold ($30,000 + $100,000 – $40,000)	$90,000
Selling expenses ($50 per unit × 200 pairs of skis)	10,000
Administrative expenses ($10 per unit × 200 pairs of skis)	2,000	102,000
Contribution margin		48,000
Fixed expenses:
Selling expenses	20,000
Administrative expenses	20,000	40,000
Net operating income		$ 8,000

3. Since 200 pairs of skis were sold and the contribution margin totaled $48,000 for the quarter, the contribution margin per unit was $240 ($48,000 ÷ 200 pair of skis = $240 per pair of skis).