4. (6 points) The Alpine House, Inc., is a large retailer of snow skis. The comp

Question

4. (6 points) The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31: Amount Sales # of pairs of skis sold Selling price per pair of skis Variable selling expense per pair of skis Variable administrative expense per pair of skis Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 160,000 200 units $800 60 12 S 20,000 s 20,000 S 30,000 $ 40,000 $ 100,000 Note: to calculate COGS you will need to use the following equation: Beg. Merch. Inventory + Merch. Purchases -End. Merch. Inventory. COGS is a variable expense. Required: 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 margin per unit? (Hint: Take total contribution margin and divide it by number of units)

Explanation / Answer

Traditional income statement Sales 160000 Cost of goods sold 90000 =30000+100000-40000 Gross margin 70000 Selling and administrative expenses: Selling expenses 32000 =20000+(200*60) Administrative expenses 22400 =20000+(200*12) 54400 Net operating income 15600 2 Contribution format income statement Sales 160000 Variable expenses: Cost of goods sold 90000 Selling expenses 12000 =200*60 Administrative expenses 2400 =200*12 104400 Contribution margin 55600 Fixed expenses: Selling expenses 20000 Administrative expenses 20000 40000 Net operating income 15600 3 Contribution margin per unit = 15600/200= $78 Question 2 a Estimated amount of allocation base = 4025000/35= 115000 DLHs b Actual amount of allocation base = 4200000/35= 120000 DLHs c Over applied overhead = 4200000-4100000 = $100000 d Predetermined overhead rate = 2580000/150000= $17.2 per MH e Applied manufacturing overhead = 145000*17.2= $2494000 f Underapplied overhead = 2600000-2494000= $106000

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