Question

The Alpine House, Inc. is a large retailer of winter sports equipment. Here is an income statement for the company’s Ski department for a recent quarter:

  

THE ALPINE HOUSE, INC. Income Statement—Ski Department For the Quarter Ended March 31
Sales			$	560,000
Less: Cost of goods sold				390,000
Gross margin				170,000
Less: Operating expenses:
Selling expenses	$	60,000
Administrative expenses		20,000		80,000
Net income			$	90,000

  

On average, skis sell for $700 per pair. Variable selling expenses are $50 per pair of skis sold. The remaining selling expenses are fixed. The administrative expenses are 20% variable and 80% fixed. The company does not manufacture its own skis; it purchases them from a supplier for $450 per pair.

  

Required:

1.	Prepare a contribution margin income statement for the quarter.

     

2.	For every pair of skis sold during the quarter, what was the contribution toward covering fixed expenses and toward earning profits?

Answer 1