The Alpine House Inc is a large retailer of snow skis The co

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 $ 1,435,000 Selling price per pair of skis $ 410 Variable selling expense per pair of skis $ 50 Variable administrative expense per pair of skis $ 18 Total fixed selling expense $ 150,000 Total fixed administrative expense $ 115,000 Beginning merchandise inventory $ 65,000 Ending merchandise inventory $ 110,000 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?

Solution

1 traditional income statement for the quarter ended March 31. Amount in $ Sales 1435000 Less: Cost of goods Sold 245000 gross margin 1190000 less: Selling & Admin Expenses Selling Expenses 325000 Administrative Expenses 178000 503000 Net operating Income 687000 Cost of goods sold = Opening merchandise + Purchases - Closing Merchandise =$65000+$290000-$110,000 =$245,000 Total pairs of skis = Total sales / Per pair skis price =$1435000/$410 =3500 Selling Expenses =$50*3500+ $150,000 =325000 Administrative Expenses =$18*3500 +$115000 =$178,000 2 contribution format income statement for the quarter ended March 31. Sales 1435000 less: Variable Expenses Cost of goods sold 245000 Selling expenses 175000 Administrative Expenses 63000 483000 Contribution margin 952000 Less: Fixed Expenses Selling expenses 150000 Administrative Expenses 115000 265000 Net operating income 687000 Cost of goods sold = Opening merchandise + Purchases - Closing Merchandise =$65000+$290000-$110,000 =$245,000 Selling Expenses =$50*3500=$175000 Administrative Expenses =$18*3500 =$63000 3 the contribution margin per unit? Total contribution margin $952000 Total number of pairs 3500 Contribution margin per pair ($952,000/3500)=$272