Question

Exercise 19-8 Contribution margin format income statement LO P2 Polarix Is a retailer of ATVs (all-terrain vehicles) and accessories. An Income statement for its Consumer ATV Department for the ent year follows. ATVs sell for $4,000 each. Variable selling expenses are $320 per ATV. The remaining selling expenses are fix Administrative expenses are 70% variable and 30% fixed. The company does not manufacture its own ATVs, It purchases them from a supplier for $1,920 each. POLARIX Income Statement-Consumer ATV Department For Year Ended December 31, 2017 Sales $64e.ee Cost of goods sold 307,200 Gross margin 332,800 Operating expenses Selling expenses $135,000 Administrative expenses 41,500 176,500 Net income $156, 300 Required: 1. Prepare an Income statement for this current year using the contribution margin format. (Round contribution margin per ATV to the nearest dollar amount.) POLARIX Income Statement - Consumer ATV Department For Year Ended December 31, 2017 Sales $ 840,000 $ 29,050 Less: Variable expenses Variable administrative expenses Variable cost of goods sold Variable selling expenses 29.050 Total variable expenses Contribution margin Less: Fixed expenses Fixed administrative expenses 12.450 Fixed selling expenses Total fixed expenses Net income (loss) 12,450 2. For each ATV sold during this year, what is the contribution toward covering fixed expenses and earning income? Contribution margin per ATV:

Answer 1

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Polarix
Workings
Sales Value	640,000.00		A
Sell Price	4,000.00		B
Units sold	160.00		C=A/B
Variable selling expense per unit	320.00		D
Units sold	160.00		See C
Variable selling expense	51,200.00		E=D*C
Total selling expense	135,000.00		F
Fixed selling expense	83,800.00		G=F-E
Purchase price per unit	1,920.00		H
Units sold	160.00		See C
Variable Cost of goods sold	307,200.00		I=H*C
Total admin expense	41,500.00		K
Fixed portion 30%	12,450.00		L=K*30%
Variable portion 70%	29,050.00		M=K*70%
Answer 1
Income statement	Amount $	Amount $
Sales		640,000.00	See A
Less: Variable expenses
Variable admin expense	29,050.00		See M
Variable Cost of goods sold	307,200.00		See I
Variable selling expense	51,200.00		See E
Total Variable expense		387,450.00	N=M+I+E
Contribution margin		252,550.00	O=A-N
Less: Fixed expenses
Fixed admin expense	12,450.00		See L
Fixed selling expense	83,800.00		See G
Total Fixed expenses		96,250.00	P=L+G
Net Income (loss)		156,300.00	Q=O-P
Answer 2		Amount $
Contribution margin		252,550.00	See O
Units sold		160.00	See C
Contribution margin per ATV		1,578.44	R=O/C