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 $ 924,000 Selling price per pair of skis $ 420 Variable selling expense per pair of skis $ 46 Variable administrative expense per pair of skis $ 18 Total fixed selling expense $ 135,000 Total fixed administrative expense $ 115,000 Beginning merchandise inventory $ 75,000 Ending merchandise inventory $ 105,000 Merchandise purchases $ 310,000 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 determine the units sold:

Units sold= 924,000/420= 2,200

Absorption costing income statement:

Sales= 924,000

COGS= (46*2,200)= (101,200)

Gross profit= 822,800

Total administrative expense= (18*2,200) + 115,00= (154,600)

Total fixed selling expense= (135,000)

Net operating profit= 533,200

Variable costing income statement:

Sales= 924,000

Variable cost= (46 + 18)*2,200= (140,800)

contribution margin= 783,200

Total administrative expense= (115,000)

Total fixed selling expense= (135,000)

Net operating profit= 533,200

Contribution margin per unit= 420 - (46+18)= $356