Answered Essay: Alpine house

Exercise 2-13 Traditional and Contribution Format Income Statements [LO2-6]

The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:
  Total sales revenue $ 150,000
  Selling price per pair of skis $ 750
  Variable selling expense per pair of skis $ 50
  Variable administrative expense per pair of skis $ 10
  Total fixed selling expense $ 20,000
  Total fixed administrative expense $ 20,000
Beginning merchandise inventory $ 30,000
  Ending merchandise inventory $ 40,000
  Merchandise purchases $ 100,000


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


Expert Answer


Computation of COGS:
Beginning Inventory 30000
Add: Purchases 100000
Total cost of goods available 130000
Less: Ending Inventory 40000
Cost of Goods solds 90000
Traditional Income Statement
Sales revenue (200 units $750) 150000
Less: Cost of Good ssold 90000
Gross margin 60000
Less: Selling and admin expense
Variable selling expense (200*50) 10000
Variable Admin expense (200*10) 2000
Fixed selling expense 20000
Fixed admin expense 20000
Net income 8000
Contribution Margin Income Statement:
Sales revenue 150000
Less: Variabble cost
COGS 90000
Selling expense 10000
Admin exenpe 2000
Contribution margin 48000
Less: Fixed cost
Sselling cost 20000
Admin cost 20000
Net income 8000
Per unit contribution towards fixed cost and net income:
Selling price per unit 750
Less: Variable cost
COGS (90000/200) 450
Selling expense 50
Admin expense 10
Contribution margin per unit 240
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