Exercise 19-8 Contribution margin format income statement LO P2 Polarix is a ret
ID: 2546158 • Letter: E
Question
Exercise 19-8 Contribution margin format income statement LO P2
Polarix is a retailer of ATVs (all-terrain vehicles) and accessories. An income statement for its Consumer ATV Department for the current year follows. ATVs sell for $4,000 each. Variable selling expenses are $220 per ATV. The remaining selling expenses are fixed. Administrative expenses are 30% variable and 70% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,840 each.
Required
Required:
1. Prepare an income statement for this current year using the contribution margin format. (Round contribution margin per ATV to the nearest dollar amount.)
2. For each ATV sold during this year, what is the contribution toward covering fixed expenses and earning income?Contribution margin per ATV:
POLARIXIncome Statement—Consumer ATV Department
For Year Ended December 31, 2017 Sales $ 636,000 Cost of goods sold 292,560 Gross margin 343,440 Operating expenses Selling expenses $ 130,000 Administrative expenses 42,100 172,100 Net income $ 171,340
Explanation / Answer
Answer
Units
Per Unit ($)
Amount ($)
Sales
159
4000
636000
(-) variable costs:
Cost of Goods Sold
159
1840
292560
Selling expenses
159
220
34980
Administrative expense
159
[12630/15] 79.43396226
12630 [calculated above]
Total variable cost
159
2139.433962
340170
Contribution margin
159
1860.566038
295830
(-) Fixed Cost
Selling expenses
95020
Administrative expense
29470 [calculated above]
Total Fixed Cost
124490
Net Income
$171340
Total Contribution margin = $295,830
Units
Per Unit ($)
Amount ($)
Sales
159
4000
636000
(-) variable costs:
Cost of Goods Sold
159
1840
292560
Selling expenses
159
220
34980
Administrative expense
159
[12630/15] 79.43396226
12630 [calculated above]
Total variable cost
159
2139.433962
340170
Contribution margin
159
1860.566038
295830
(-) Fixed Cost
Selling expenses
95020
Administrative expense
29470 [calculated above]
Total Fixed Cost
124490
Net Income
$171340
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