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 | $ | 1,040,000 |
| Selling price per pair of skis | $ | 400 |
| Variable selling expense per pair of skis | $ | 47 |
| Variable administrative expense per pair of skis | $ | 16 |
| Total fixed selling expense | $ | 135,000 |
| Total fixed administrative expense | $ | 110,000 |
| Beginning merchandise inventory | $ | 65,000 |
| Ending merchandise inventory | $ | 110,000 |
| Merchandise purchases | $ | 295,000 |
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?
Explanation
1.
Cost of goods sold: ($65,000 + $295,000 – $110,000) = $250,000
Selling expenses: (($47 per unit × 2,600 pairs of skis*) + $135,000) = $257,200
Administrative expenses: (($16 per unit × 2,600 pairs of skis) + $110,000) = $151,600
*$1,040,000 sales ÷ $400 per pairs of skis = 2,600 pairs of skis.
2.
Cost of goods sold: ($65,000 + $295,000 – $110,000) = $250,000
Selling expenses: ($47 per unit × 2,600 pairs of skis) = $122,200
Administrative expenses: ($16 per unit × 2,600 pairs of skis) = $41,600
3.
Since 2,600 pairs of skis were sold and the contribution margin totaled $626,200 for the quarter, the contribution margin per unit was $241 ($626,200 ÷ 2,600 pair of skis = $241 per pair of skis).
Thanks
