4. (6 points) The Alpine House, Inc., is a large retailer of snow skis. The comp

Question

4. (6 points) 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 # of pairs of skis sold Selling price per pair of skis Variable selling expense per pair of skis Variable administrative expense per pair of skis Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 160,000 200 units 800 60 12 $20,000 $ 20,000 $30,000 $40,000 $ 100,000 Note: to calculate COGS you will need to use the following equation: Beg. Merch. Inventory + Merch. Purchases - End. Merch. Inventory. COGS is a variable expense. 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? (Hint: Take total contribution margin and divide it by number of units)

Explanation / Answer

Req 1. Traditional Income Statement: Sales 160000 Less: Cost of Goods sold Beginning Inventory 30000 Add: Purchases 100000 Inventory available 130000 Less: Ending inventory 40000 Cost of goods sold 90000 Gross Margin 70000 Less: Selling and admin expenses Variable Sselling expense (200*60) 12000 Variable Admin expenses (200*12) 2400 Fixed selling expenses 20000 Fixed Admin expenses 20000 Net Income 15600 Req 2. Contribution Margin Income Statement: Sales revenue 160000 Less: Variable cost Cost of goods sold 90000 Selling expenses 12000 Admin expenses 2400 Total Vvariable cost 104400 Contribution Margin   55600 Less: Fixed cost Fixed selling expense 20000 Fixed admin expenses 20000 Net income 15600 Req 3. Total contribution earned 55600 Divide: Number of units 200 Contribution margin per unit 278

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