Question

Polarix is a retailer of ATVs (all-terrain vehicles) and accessories. An income statement for its Consumer ATV Department for the current year follows. ATVs sell for $3,400 each. Variable selling expenses are $240 per ATV. The remaining selling expenses are fixed. Administrative expenses are 30% variable and 70% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,920 each. POLARIX Income Statement—Consumer ATV Department For Year Ended December 31 Sales $ 680,000 Cost of goods sold 384,000 Gross margin 296,000 Operating expenses Selling expenses $ 140,000 Administrative expenses 41,900 181,900 Net income $ 114,100 Required: 1. Prepare an income statement for the current year using the contribution margin format. (Do not round intermediate calculations.

Round contribution margin per ATV value to the nearest whole number.)

Answer 1

Answer-

POLARIX
CONTRIBUTION MARGIN INCOME STATEMENT-CONSUMER ATV DEPARTMENT
FOR THE YEAR ENDED DECEMBER 31
PARTICULARS		AMOUNT
		$
Sales		680000
Less- Variable expenses
Cost of goods sold	$384000
Administrative expenses	($41900*30%)= $12570
Selling expenses	($680000/$3400 per TV)*$240 per TV = $48000
Total variable expense		444570
Contribution margin		235430
Less- Fixed expenses
Administrative expenses	($41900*70%)= $29330
Selling expenses	($140000 - $48000) = $92000
Total fixed expenses		121330
Net income		114100

2)- Contribution margin per TV = $2223 per TV.

Explanation- Contribution margin per TV = Selling price per TV –Variable expenses per TV

= $3400 per TV – ($235430/200 TV)

= $3400 per TV - $1177.15 per TV

= $2223