Exercise 2-13 Traditional and Contribution Format Income Statements [LO2-6] The Alpine House, Inc., is a large retailer...

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Exercise 2-13 Traditional and Contribution Format IncomeStatements [LO2-6]
The Alpine House, Inc., is a large retailer of snow skis. Thecompany assembled the information shown below for the quarter endedMarch 31:
Amount
  Total sales revenue $ 1,408,000
  Selling price per pair of skis $ 440
  Variable selling expense per pair of skis $ 48
  Variable administrative expense per pair ofskis $ 19
  Total fixed selling expense $ 160,000
  Total fixed administrative expense $ 125,000
Beginning merchandise inventory $ 75,000
  Ending merchandise inventory $ 115,000
  Merchandise purchases $ 310,000
Required:
1.
Prepare a traditional income statement for the quarter endedMarch 31.

2.
Prepare a contribution format income statement for the quarterended March 31.

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

Answer & Explanation Solved by verified expert

3.9 Ratings (460 Votes)

Cost of goods sold = 75000+310000-115000 = $270000

Selling unit = 1408000/440 = 3200 Units

a) Traditional format income statement

Sales		1408000
Cost of goods sold		270000
Gross profit		1138000
Selling and administrative expense
Selling expense (3200*48+160000)	313600
Administrative expense (3200*19+125000)	185800
Total selling and administrative expense		499400
Net operating income		638600

b) Contribution format income statement

Sales		1408000
Variable Cost
Cost of goods sold	270000
Variable selling expense (3200*48)	153600
Variable administrative expense (3200*19)	60800
Total Variable expense		484400
Contribution margin		923600
Fixed cost
Fixed Selling expense	160000
Fixed Administrative expense	125000
Total Fixed cost		285000
Net operating income		638600

c) Contribution margin per pair = 440-48-19-(270000/3200) = $288.625 or $289

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Transcribed Image Text

Exercise 2-13 Traditional and Contribution Format IncomeStatements [LO2-6]The Alpine House, Inc., is a large retailer of snow skis. Thecompany assembled the information shown below for the quarter endedMarch 31:Amount Total sales revenue$1,408,000 Selling price per pair of skis$440 Variable selling expense per pair of skis$48 Variable administrative expense per pair ofskis$19 Total fixed selling expense$160,000 Total fixed administrative expense$125,000 Beginning merchandise inventory$75,000 Ending merchandise inventory$115,000 Merchandise purchases$310,000 Required:1.Prepare a traditional income statement for the quarter endedMarch 31. 2.Prepare a contribution format income statement for the quarterended March 31. 3.What was the contribution toward fixed expenses and profits foreach pair of skis sold during the quarter? (Round yourfinal answer to nearest whole dollar amount.)

		Amount
Total sales revenue	$	1,408,000
Selling price per pair of skis	$	440
Variable selling expense per pair of skis	$	48
Variable administrative expense per pair ofskis	$	19
Total fixed selling expense	$	160,000
Total fixed administrative expense	$	125,000
Beginning merchandise inventory	$	75,000
Ending merchandise inventory	$	115,000
Merchandise purchases	$	310,000

Required:
1.	Prepare a traditional income statement for the quarter endedMarch 31.

2.	Prepare a contribution format income statement for the quarterended March 31.

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