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$150,000Selling price per pair of skis$750Variable selling expense per pair of skis$50Variable administrative expense per pair of skis$10Total fixed selling expense$20,000Total fixed administrative expense$20,000Beginning merchandise inventory$30,000Ending merchandise inventory$40,000Merchandise purchases$100,000 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

Answer 1

Answer:

Results are below.

Explanation:

First, we need to calculate the cost of goods sold:

COGS= beginning finished inventory + cost of goods purchased - ending finished inventory

COGS= 30,000 + 100,000 - 40,000= 90,000

Units sold= 150,000/750= 200 units

Traditional format income statement:

Sales= 150,000

COGS= (90,000)

Gross profit= 60,000

Total selling expense= (50*200 + 20,000)= (30,000)

Total administrative expense= (10*200 + 20,000)= (22,000)

Net operating income= 8,000

Contribution format income statement:

Sales= 150,000

Total variable cost= (90,000 + 50*200 + 10*200)= (102,00)

Contribution margin= 48,000

Total fixed selling expense= (20,000)

Total fixed administrative expense= (20,000)

Net operating income= 8,000

Unitary contribution margin= 102,000/200= $510