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 $ 1,350,000 Selling price per pair of skis $ 450 Variable selling expense per pair of skis $ 49 Variable administrative expense per pair of skis $ 19 Total fixed selling expense $ 150,000 Total fixed administrative expense $ 110,000 Beginning merchandise inventory $ 60,000 Ending merchandise inventory $ 120,000 Merchandise purchases $ 290,000 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:

Giving the following information:

Units sold= 1,350,000 / 450= 3,000

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

COGS= 60,000 + 290,000 - 120,000= $338,000

Absorption costing income statement:

Sales= 1,350,000

COGS= (338,000)

Gross profit= 1,012,000

Total selling expense= (49*3,000) + 150,000= (297,000)

Total administrative expense= (19*3,000) + 110,000= (167,000)

Net operating income= $548,000

Now, the contribution margin income statement:

Sales= 1,350,000

COGS= (338,000)

Total Variable selling expense=  (49*3,000)= (147,000)

Total Variable administrative expense= (19*3,000)= (57,000)

Total contribution margin= 808,000

Total fixed selling expense= (150,000)

Total fixed administrative expense= (110,000)

Net operating income= $548,000

Finally, the unitary contribution margin:

CM per unit= 808,000 / 3,000= $269.33