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

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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

COGS= 90,000

Now, the number of skis sold:

Units sold= 150,000/750= 200 units

Traditional 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)= (102,000)

Contribution margin= 48,000

Total fixed selling expense= (20,000)

Total fixed administrative expense= (20,000)

Net operating income= 8,000

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1. Traditional income statement for the quarter ended March 31 is $8,000.

2. Contribution format income statement for the quarter ended March 31 is $8,000.

3. The contribution margin per unit is 240.

Income statement:

1. Alpine House, Inc., Traditional Income Statement

Sales revenue $150,000

Cost of goods sold $90,000

($30,000 + $100,000 - $40,000)

Gross margin $60,000

Selling and administrative expenses:

Selling expenses $30,000

[(150,000/750×50)+$20,000)]

Administrative expenses $22,000

[(150,000/750×10)+$20,000)]

Total selling and administrative expenses $52,000

Net operating income $8,000

2. Alpine House, Inc., Contribution format Income Statement

Sales revenue $150,000

Variable expenses:

Cost of good sold sold $90,000

Selling expenses $10,000

Administrative expenses $2,000

Total variables expenses $102,000

Contribution margin $48,000

Fixed expenses:

Selling expenses $20,000

Administrative expenses $20,000

Total fixed cost $40,000

Net operating income $8,000

3. Selling price per unit 750

Variable cost per unit 510

(102,000/200)

Contribution margin per units 240

Inconclusion traditional income statement for the quarter ended March 31 is $8,000, contribution format income statement for the quarter ended March 31 is $8,000, and the contribution margin per unit is 240.

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