Exercise 19-8 Contribution margin format income statement LO P2 Polarix is a ret
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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 $3,800 each. Variable selling expenses are $280 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 $1,860 each POLARIX Income Statement-Consumer ATV Department For Year Ended December 31, 2017 Sales Cost of goods sold Gross margin Operating expenses $665,000 325,50 339, 500 $155,000 Selling expenses Administrative expense:s 40,400 195,400 $144,100 Net income 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.) POLARIX Income Statement-Consumer ATV Department For Year Ended December 31, 2017 Sales $3,800 ess: Variable expenses Variable administrative expenses Variable cost of goods sold Variable selling expenses Net income (loss) 2. For each ATV sold during this year, what is the contribution toward covering fixed expenses and earning income? Contribution margin per ATVExplanation / Answer
Answer
Amount ($)
Working
Sales
$665000
[given]
Less: variable costs:
Cost of Goods Sold
325500
[given]
Selling expenses
49000
[175 x $280]
Administrative expense
12120
[40400 x 30%]
Total variable cost
$386620
[total]
Contribution margin
$278380
[665000 - 386620]
Less: Fixed Cost
Selling expenses
106000
[155000-49000]
Administrative expense
28280
[40400 x 70%]
Total Fixed Cost
$134280
[total]
Net Income
$144100
[278380 - 134280]
Total Contribution margin [as calculated above] = $278,380
Total Units sold = 175 units
Contribution margin per ATV = $278380 / 175 = $1,591
Amount ($)
Working
Sales
$665000
[given]
Less: variable costs:
Cost of Goods Sold
325500
[given]
Selling expenses
49000
[175 x $280]
Administrative expense
12120
[40400 x 30%]
Total variable cost
$386620
[total]
Contribution margin
$278380
[665000 - 386620]
Less: Fixed Cost
Selling expenses
106000
[155000-49000]
Administrative expense
28280
[40400 x 70%]
Total Fixed Cost
$134280
[total]
Net Income
$144100
[278380 - 134280]
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