Question

assume the following information for a merchandising company: number of units sold20,000selling price per unit$ 30variable selling expense per unit$ 3variable administrative expense per unit$ 2fixed administrative expenses$ 50,000beginning merchandise inventory$ 24,000ending merchandise inventory$ 19,000merchandise purchases$ 340,000what is the contribution margin?

Answer 1

The contribution margin for the merchandising company is calculated by subtracting the total variable expenses from the total revenues, which amounts to $500,000.

Step-by-step explanation:

To calculate the contribution margin, we need to subtract all variable expenses from the total revenues. In this case, the number of units sold is 20,000 at a selling price per unit of $30. The variable selling expense per unit is $3 and the variable administrative expense per unit is $2.

Firstly, calculate the total revenues which is 20,000 units × $30 = $600,000. Next, calculate the total variable expenses, which is (20,000 units × $3) + (20,000 units × $2) = $60,000 + $40,000 = $100,000. Finally, subtract the total variable expenses from the total revenues to get the contribution margin: $600,000 - $100,000 = $500,000.

Therefore, the contribution margin for the merchandising company is $500,000.