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	$	1,188,000
Selling price per pair of skis	$	440
Variable selling expense per pair of skis	$	47
Variable administrative expense per pair of skis	$	15
Total fixed selling expense	$	155,000
Total fixed administrative expense	$	100,000
Beginning merchandise inventory	$	75,000
Ending merchandise inventory	$	115,000
Merchandise purchases	$	305,000

Required:

1. Prepare a traditional income statement for the quarter ended March 31.

The Alpine House, Inc.
Traditional Income Statement
Sales		$1,188,000
Cost of goods sold
Gross margin
Selling and administrative expenses:
Selling expenses
Administrative expenses
		0
Net operating income

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

The Alpine House, Inc.
Contribution Format Income Statement
Sales
Variable expenses:
Cost of goods sold
Selling expenses
Administrative expenses
		0
Contribution margin
Fixed expenses:
Selling expenses
Administrative expenses
		0
Net operating income

3. What was the contribution margin per unit?

Answer 1

1. Prepare a traditional income statement for the quarter ended March 31.

Sales		1188000
Cost of goods sold		(265000)
Gross profit		923000
Selling expenses	(281900)
Administrative expenses	(140500)	(422400)
Net operating income		500600

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

The Alpine House, Inc.
Contribution Format Income Statement
Sales		1188000
Variable expenses:
Cost of goods sold		(265000)
Selling expenses		(126900)
Administrative expenses		(40500)
Total variable cost		(432400)
Contribution margin		755600
Fixed expenses:
Selling expenses	(155000)
Administrative expenses	(100000)
Total fixed expenses		(255000)
Net operating income		500600

3. Contribution margin per unit = 755600/2700 = 279.85 per unit