Question
The Alpine House, Inc. is a large retailer of winter sports equipment. Here is an income statement for the companys Ski department for a recent
The Alpine House, Inc. is a large retailer of winter sports equipment. Here is an income statement for the companys Ski department for a recent quarter:
THE ALPINE HOUSE, INC. Income StatementSki Department For the Quarter Ended March 31 | |||||
Sales | $ | 560,000 | |||
Less: Cost of goods sold | 390,000 | ||||
Gross margin | 170,000 | ||||
Less: Operating expenses: | |||||
Selling expenses | $ | 60,000 | |||
Administrative expenses | 20,000 | 80,000 | |||
Net income | $ | 90,000 | |||
On average, skis sell for $800 per pair. Variable selling expenses are $50 per pair of skis sold. The remaining selling expenses are fixed. The administrative expenses are 17.5% variable and 82.5% 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?
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