Question

The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information...

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 $ 1,092,000
Selling price per pair of skis $ 420
Variable selling expense per pair of skis $ 45
Variable administrative expense per pair of skis $ 19
Total fixed selling expense $ 135,000
Total fixed administrative expense $ 120,000
Beginning merchandise inventory $ 70,000
Ending merchandise inventory $ 115,000
Merchandise purchases $ 290,000

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?

Homework Answers

Answer #1

(1)Traditional income statement for the quarter ended March 31.

Particulars

Amount

Amount

Sales

$10,92,000

Less : Cost of goods sold

($2,45,000)

Gross margin

$8,47,000

Selling and administrative expenses:

Selling expenses

$2,52,000

Administrative expenses

$1,69,400

($4,21,400)

Net operating income

$4,25,600

Cost of goods sold = $70000 + 290000 – 115000 = $2,45,000

Pairs of snow skis = $1092000 / $420 = 2,600 pairs of skis

Selling expenses = (2600 x $45) + 135000 = $2,52,000

Administrative expenses = (2600 x $19) + 120000 = $1,69,400

(2) Contribution format income statement for the quarter ended March 31.

Particulars

Amount

Amount

Sales

$10,92,000

Variable Expenses

Cost of goods sold

$2,45,000

Selling expenses

$1,17,000

Administrative expenses

$49,400

($4,11,400)

Contribution margin

$6,80,600

Fixed expenses:

Selling expenses

$1,35,000

Administrative expenses

$1,20,000

($2,55,000)

Net operating income

$4,25,600

(3) Contribution margin per unit = $262 per unit

Contribution margin per unit = Selling price – variable cost per unit

= $420 – [$4,11,400 / 2600 Pairs ]

= $420 - 158.23

= $261.77

= $262 (Rounded to whole number)             

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