Income Statement Analysis for The Alpine House, Inc.

The Alpine House, Inc.: Income Statement Analysis

This analysis examines The Alpine House, Inc., a large snow ski retailer, by preparing traditional and contribution format income statements for the quarter ended March 31. We will also calculate the contribution toward fixed expenses and profits per pair of skis sold.

Data:

• Total sales revenue: $150,000* Selling price per pair of skis: $750* Variable selling expense per pair of skis: $50* Variable administrative expense per pair of skis: $10* Total fixed selling expense: $20,000* Total fixed administrative expense: $20,000* Beginning merchandise inventory: $30,000* Ending merchandise inventory: $40,000* Merchandise purchases: $100,000

1. Traditional Income Statement (Quarter Ended March 31):

| Item | Amount | |---|---|| Sales Revenue | $150,000 || Cost of Goods Sold | $90,000 || * Beginning Merchandise Inventory | $30,000 || * Merchandise Purchases | $100,000 || * Total Cost of Goods Available | $130,000 || * Ending Merchandise Inventory | $40,000 || Gross Profit | $60,000 || Operating Expenses | || * Variable Selling Expense | | | * Variable Administrative Expense | || * Total Variable Expenses | $60 per pair of skis || * Total Fixed Selling Expense | $20,000 || * Total Fixed Administrative Expense | $20,000 || * Total Fixed Expenses | $40,000 || Operating Income | $20,000 |

2. Contribution Format Income Statement (Quarter Ended March 31):

| Item | Amount ||---|---|| Sales Revenue | $150,000 || Variable Expenses | || * Variable Selling Expense | || * Variable Administrative Expense | || * Total Variable Expenses | $60 per pair of skis || Contribution Margin | $90,000 || Fixed Expenses | || * Total Fixed Selling Expense | $20,000 || * Total Fixed Administrative Expense | $20,000 || * Total Fixed Expenses | $40,000 || Operating Income | $50,000 |

3. Contribution Analysis per Pair of Skis:

• Contribution towards Fixed Expenses per pair of skis: $0 (Variable Expenses per unit equal Contribution Margin per unit)* Contribution towards Profits per pair of skis: $90

Conclusion:

This analysis demonstrates how traditional and contribution format income statements provide different insights into a company's financial performance. The contribution format highlights the contribution margin, which is crucial for understanding profitability and conducting break-even analysis. In this case, The Alpine House, Inc. has a healthy contribution margin, indicating strong potential for profitability.