Polarix is a retailer of ATVs (all-terrain vehicles) and accessories. An income
ID: 2574345 • 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 $3,400 each. Variable selling expenses are $210 per ATV. The remaining selling expenses are fixed. Administrative expenses are 20% variable and 80% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,810 each.
Required:
Income Statement—Consumer ATV Department
For Year Ended December 31, 2017 Sales $ 625,600 Cost of goods sold 333,040 Gross margin 292,560 Operating expenses Selling expenses $ 125,000 Administrative expenses 41,000 166,000 Net income $ 126,560 POLARIX Income Statement- Consumer ATV Department For Year Ended December 31, 2017 Net income (loss) 2. For each ATV sold during this year, what is the contribution toward covering fixed expenses and earning income? 2
Explanation / Answer
Answer :
No of unit = Sales/ Sale per unit=625600/3400= 184 Units
So
POLARIX
Income Statement-Consumenr ATV Department
For the year ended December 2017
Contribution Margin per Av
245720/184= $1335.43
Sales (184*3400) $ 625600 Less : Variable cost of good sold (184*1810) $ 333040 Gross Contribution Margin $ 292560 Less : Variable Selling Expense 184*210 $ 38640 Variable Administrative Expense 41000*20% $ 8200 Contribution Margin $ 245720 Less: Fixed Selling Expense (125000-38640) $ 86360 Fixed Admin Expense (41000*.80) $ 32800 Net Operating Income $ 126560