Exercise 13 The Alpine House, Inc., is a large retailer of snow skis. The compan

Question

Exercise 13

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 3(Excel Format)

2. Prepare a contribution format income statement for the quarter ended March 3(Excel Format)

3. What was the contribution toward fixed expenses and profits for each pair of skis sold during the quarter? (State this figure in a single dollar amount per pair of skis.)

Explanation / Answer

1. income statement :-

variable selling expense: 50*200=10000

fixed selling expenses : 20000

variable administration expenses: 10*200=2000

fixed administration expenses:20000

2. contribution format :-

less: variable costs

variable selling expenses:10000

variable admin. expenses: 2000

merchandise purchases: 100000

change in inventory: (10000)

particulars amount merchandise purchases 100000 add: opening stock of finished goods 30000 less: closing stock of finished goods (40000) cost of goods sold 90000 add: selling and administration expenses

variable selling expense: 50*200=10000

fixed selling expenses : 20000

variable administration expenses: 10*200=2000

fixed administration expenses:20000

52000 cost of sales 142000 profits 8000 sales 150000

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