The Alpine House, Inc., is a large retailer of snow skis. The company assembled

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:

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 with variable and fixed expenses

3. What was the contribution toward fixed expenses and profits for each pair of skis sold during the quarter? (Round your final answer to nearest whole dollar amount.)

Amount Total sales revenue $ 1,452,000 Selling price per pair of skis $ 440 Variable selling expense per pair of skis $ 46 Variable administrative expense per pair of skis $ 17 Total fixed selling expense $ 135,000 Total fixed administrative expense $ 110,000 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 with variable and fixed expenses

3. What was the contribution toward fixed expenses and profits for each pair of skis sold during the quarter? (Round your final answer to nearest whole dollar amount.)

Explanation / Answer

Question 1

Traditional Income statement for the quarter ended mar 31

Working Note -1

Cost of goods sold / Direct material consumed

= Opening Inventory + Purchases - Closing / ending Inventory

= $75,000 + $310,000 - $105,000

= $280,000

Working Note -2

Number of skies pair sold during the quarter = $1,452,000 ÷ $440 = 3,300 pair of skies

Working Note -3

Variable selling expenses = 3,300 pairs x $46 = $151,800

Fixed selling expenses = $135,000

Total selling expenses = $286,800   

Working note -4

Variable administrative expenses = 3,300 pairs x $17 = $56,100

Fixed variable expenses = $110,000

Total Administrative expenses = $166,100

Question 2

Contribution format income statement for the quarter ended March 31

Question 3

Contribution toward fixed expenses and profits for each pair of skis sold during the quarter:

Contribution margin per pair of skies = $964,100 ÷ 3,300 pairs = $292

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Particulars Amount a. Sales revenue $1,452,000 b. Cost of goods sold (Refer working note -1) $280,000 c. Gross profit = (a - b) $1,172,000 d. Selling expenses (Refer working note -3) $286,800 e. Administrative expenses (Refer working note -4) $166,100 f. Net profit (c - d - e) $719,100

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