Polarix is a retailer of ATVs (all terrain vehicles) and accessories. An income
ID: 2484495 • 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, on average, for $3,200. Variable selling expenses are $230 each. The remaining selling expenses are fixed. Administrative expenses are 40% variable and 60% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,880 each. Required: Prepare an income statement for this current year using the contribution margin format.Explanation / Answer
No of Units sold (614400/3200)= 192 Sales 614400 Less Variable cost: Cost of Purchase (192*1880)…A 360960 Selling expenses (192*230)…B 44160 Administrative expenses(42400*40%)….C 16960 Total variable Expense D=(A+B+C) 422080 Contribution Margin (Sales-Total Variable cost)…E 192320 Fixed Expenses: Selling expenses (150000-44160)…..F 105840 Administrative expenses(42400*60%)….G 25440 Total Fixed Expenses (F+G) 131280 Net Income (Contribution Margin-Fixed Expense) 61040 Answer no 2: Contribution Marging of each ATV (192320/192) 1001.67