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O ezto.mheducation.com/hm.tpx Polarix is a retailer of ATVs (all- terrain vehicl

ID: 2557337 • Letter: O

Question

O ezto.mheducation.com/hm.tpx 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 20% variable and 80% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,810 each POLARIX Income Statement Consumer ATV Department For Year Ended December 31, 2015 Sales Cost of goods sold $676,400 322,180 Gross margin Operating expenses 354,220 Selling expenses Administrative expenses $155,000 42,400 197,400 156,820 Net income Required 1. Prepare an income statement for this cuirrent year using the contribution margin format. POLARIX Income Statement Consumer ATV Department For Year Ended December 31, 2015 Sales Less: Variable expenses Variable cost of goods sold Fixed selling expenses Fixed administrative expenses Total variable expenses Contribution margirn Less: Fixed expenses Fixed selling expenses Fixed administrative expenses Net income (loss) For each ATV s year, what is the contributi Contribution margin per ATV

Explanation / Answer

First we will calculate the total units of ATV sold

Units sold = Total sales amount/Sale price per unit

= $676,400/$3,800

= 178 units of ATV

Answer to Question Number 1 - Income Statement

Sales = $676,400

Less: variable expenses

Variable cost of goods sold = $322,180

Variable selling expenses ($280 * 178 units) = $49,840

Variable Administrative expenses ($42,400 * 20%) = $8,480

Total Variable expense = $380,500

Contribution Margin = $295,900

Less: Fixed expenses

Fixed Selling expenses ($155,000 - $49,840) = $105,160

Fixed Administrative expenses = $33,920

Total Fixed Expense = $139,080

Net Income = $156,820

Answer to Question Number 2

Contribution margin per ATV = Total contribution margin/Total units sold

= $295,900/178 units

= $1,662.36