Question

An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's Bookstore Income Statement For Quarter Ended March 31 Sales $ 900,000 Cost of goods sold 630,000 Gross margin 270,000 Selling and administrative expenses Selling$ 100,000 Administrative104,000204,000 Net operating income $ 66,000 On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed. The contribution margin for Sam's Bookstore for the first quarter is g

Answer 1

The contribution margin for Sam's Bookstore for the first quarter is 0.84 or 84 %

Step-by-step explanation:

Contribution Margin = Contribution ÷ Sales

Where,

Contribution = Sales - Variable Costs

where,

Sales :

Sales = $ 900,000

Number of Books Sold = $ 900,000 ÷ $50

= 18,000 books

Variable Costs Calculation :

Cost of goods sold $630,000

Variable selling expenses ($5 × 18,000 books) $90,000

Variable administrative expenses( 4% × $ 900,000) $36,000

Total Variable Costs $756,000

Therefore,

Contribution Margin = $756,000÷ $ 900,000

= 0.84 or 84 %