Question

Stanley's Bicycles store buys bicycles on average for $600 and sells them on average for $750. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1,400 a month rent for his store, and also pays $3,000 a month to his staff in addition to the commissions. Stanley sold 200 bicycles in June. If Stanley prepares a contribution margin income statement for the month of June, what would be his contribution margin

Answer 1

Stanley's Bicycles contribution margin is $7,500

Step-by-step explanation:

Stanley's Bicycles Contribution Margin Income Statement for the month of June

Sales ($750 x 200) $150,000

Less Variable Costs :

Costs of Sales ($600 x 200) $120,000

Commissions ( $150,000 x 15 %) $22,500 ($142,500)

Contribution $7,500

Less Fixed Costs

Rent $1,400

Salaries $3,000 ($4,400)

Net Income $3,100

Conclusion

Contribution Margin is Sales less Variable Costs. Therefore, Stanley's Bicycles contribution margin is $7,500