Polarix is a retailer of ATVs (all-terrain vehicles) and accessories. An income
ID: 2399444 • Letter: P
Question
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 $3,600 each. Variable selling expenses are $310 per ATV. The remaining selling expenses are fixed. Administrative expenses are 30% variable and 70% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,810 each.
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.)
POLARIXIncome Statement—Consumer ATV Department
For Year Ended December 31, 2017 Sales $ 619,200 Cost of goods sold 311,320 Gross margin 307,880 Operating expenses Selling expenses $ 160,000 Administrative expenses 42,500 202,500 Net income $ 105,380 Bookmarks New Tab f (4) Facebook Y Yahoo! Log On - My Pay & B Required: 1. Prepare an income statement for this current year using the contribution margin format POLARIX Income Statement - Consumer ATV Department For Year Ended December 31, 2015 Net income (loss) For each ATV sold during this year, what is the contribution toward covering fixed expenses and earning income? Contribution margin per ATV
Explanation / Answer
Answer:
1
POLARIX
CONTRIBUTION MARGIN REPORT
Income Statement (Variable Costing)
For Year Ended December 31, 2017
Sales (172 units X $3,600)
$619,200
Less: Variable Costs
Variable Cost of Goods Sold (172 units @ 1,810)
311,320
Variable selling expenses (172 units @ $310)
53,320
Variable admin expenses ($42,500 X 30%)
12,750
Total Variable Costs
377,390
Contribution Margin
$241,810
Less: Fixed Expenses
Fixed Selling Expenses ($160,000 - $53,320)
106,680
Fixed Admin Expenses (42,500 X 70%)
$29,750
Total Fixed Expenses
136,430
NET INCOME
$105,380
2
Contribution Margin Per Unit
= Sales Price Per Unit - Variable Cost Per Unit
=3600-2194
=1406
Contribution Margin Per Unit =$1406
POLARIX
CONTRIBUTION MARGIN REPORT
Income Statement (Variable Costing)
For Year Ended December 31, 2017
Sales (172 units X $3,600)
$619,200
Less: Variable Costs
Variable Cost of Goods Sold (172 units @ 1,810)
311,320
Variable selling expenses (172 units @ $310)
53,320
Variable admin expenses ($42,500 X 30%)
12,750
Total Variable Costs
377,390
Contribution Margin
$241,810
Less: Fixed Expenses
Fixed Selling Expenses ($160,000 - $53,320)
106,680
Fixed Admin Expenses (42,500 X 70%)
$29,750
Total Fixed Expenses
136,430
NET INCOME
$105,380