Mountain Sports Ltd. is a small, Lethbridge-based company located on a major street in the west end.Marconi, an owner, is the Company President while Jeff Peterson, another owner, holds the position of Marketing Manager.The company was formed in2012.

Mountain Sports carries a limited line of products and services that can be divided into foursegments:

1.Cross-country ski packages (skis, boots, and poles)

2.Mountain bicycles

3.Accessories

4.Repair and service department

III.Question 1 Contribution Margin Income Statement & CVP Analysis

Mountain Sports Ltd

Income Statement

For the year ending December 31, 2018

Sales: $1,957,427

COGS: 833,623

Gross profit on sales: ----------------- $1,123,804

Operating expenses:

Advertising: $ 98,900

Depreciation: 21,528

Property Taxes: 32,000

Rent: 48,000

Repairs & service equipment: 94,944

Salaries and commissions: 391,160

Utilities: 100,000

Total operating expenses: --------------- 786,532

-----------------

Operating income: $337,272

Part A:(answer in the Excel Solution Workbook file on the Question 1 tab)

In order to evaluate the operations of Mountain Sports Ltd., you must reformat the company's 2018 Income Statement using the Contribution Margin Income Statement approach.

The following information relates tooperating expenses:

1. Total fixed salary costs are $207,199. Employees of the Cross-Country Ski Packages, Mountain Bicycles, and Accessories divisions receive a 10% commission on all sales. The Repair & Service department's employees do not receive a commission.

1. The rent is fixed at $4,000 per month.

1. Utilities are fixed costs.

1. Repairs and Service expense varies with sales activity.

1. Depreciation and property taxes are fixed costs.

1. Advertising costs are fixed.