The Alpine House, Inc. is a large retailer of winter sports equipment. Here is an income statement

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The Alpine House, Inc. is a large retailer of winter sports equipment. Here is an income statement for the company?s ski department for a recent quarter:

THE ALPINE HOUSE, INC.Income Statement?Ski DepartmentFor the Quarter Ended March 31Sales.....................................................................................$560,000Less: Cost of goods sold.......................................................390,000Gross margin.........................................................................170,000

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On average, skis sell for $700 per pair. Variable selling expenses are $50 per pair of skis sold. The remaining selling expenses are fixed. The administrative expenses are 20% variable and 80% fixed. The company does not manufacture its own skis; it purchases them from a supplier for $450 per pair.

Required:

1. Prepare a contribution margin income statement for the quarter.

2. For every pair of skis sold during the quarter, what was the contribution toward covering fixed expenses and toward earning profits?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Related Book For  book-img-for-question

Introduction to Managerial Accounting

ISBN: 978-1259105708

5th Canadian edition

Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan

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