The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:

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