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 current year follows. ATVs sell for $4,000 each. Variable selling expenses are $220 per ATV. The remaining selling expenses are fixed. Administrative expenses are 10% variable and 90% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,850 each.

POLARIX Income Statement—Consumer ATV Department For Year Ended December 31, 2017
Sales				$	620,000
Cost of goods sold					286,750
Gross margin					333,250
Operating expenses
Selling expenses	$	160,000
Administrative expenses		40,700			200,700
Net income				$	132,550

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.)

Answer 1

		Polarix
		Income statement
1)	Sales					620,000
	less:Variable expenses
	Variable cost of goods sold				286,750
	Variable selling expenses				34100
	Variable administrative expenses				4070
	total variable expenses					324,920
	Contribution margin					295,080
	less:Fixed expenses
	Fixed selling expenses				125900
	Fixed administrative expenses				36630
	Total fixed expenses					162530
	Net income (loss)					132,550