Final answer:
The contribution margin for the Waleska branch is calculated by subtracting variable expenses ($3,650,250) from the sales ($4,500,000), leading to a contribution margin of $849,750. This figure aligns with option C ($849,500) assuming a minor rounding difference. The provided reference scenario follows the same principle, indicating a center should continue in business if it has a positive contribution margin.
Step-by-step explanation:
In the context of Canton Chemicals, when analyzing the Waleska branch which is seen as an investment center, we need to calculate the contribution margin. The contribution margin is determined by subtracting variable expenses from sales. Hence, for the Waleska branch with sales of $4,500,000 and variable expenses of $3,650,250, the contribution margin would be calculated as follows:
$4,500,000 (Sales) - $3,650,250 (Variable Expenses) = $849,750 (Contribution Margin)
Therefore, based on the provided figures, the correct answer for the contribution margin of the Waleska branch is $849,750 which is closest to option C. $849,500, assuming a minor rounding difference.
Regarding the example given for reference, if a center earns revenues of $20,000 and the variable costs are $15,000, the center has a positive contribution margin of $5,000, thus it would typically be advisable for the center to continue in business as it is covering its variable costs and contributing towards fixed costs and potentially profits.