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 $20
Total fixed selling expense $155,000
Total fixed administrative expense $105,000
Beginning merchandise inventory $75,000
Ending merchandise inventory $120,000
Merchandise purchases $310,000

Required:
a. Prepare a traditional income statement for the quarter ended March 31.
b. Prepare a contribution format income statement for the quarter ended March 31.
c. What was the contribution margin per unit?

Answer 1

Answer:

a) traditional format income statement

Sales revenue                                                $1,188,000

COGS                                                             ($355,000)

Gross profit                                                     $833,000

Expenses:

• Selling expenses              $281,900
• Administrative expenses $159,000     ($440,900)

Operating income                                            $392,100

b) contribution format income statement

Sales revenue                                                $1,188,000

Variable costs:

• COGS                             $355,000
• Selling expense              $126,900
• Administrative expense  $54,000       ($535,900)

Contribution margin                                        $652,100

Fixed expenses:

• Selling expenses              $155,000
• Administrative expenses $105,000    ($260,000)

Operating income                                           $392,100

c) contribution margin per unit = $652,100 / 2,700 units = $241.52