Question

AirStep Shoe Company has two retail stores, one in Gainesville and the other in Orlando. The Gainesville store had sales of $100,000, a contribution margin of 35 percent, and a segment margin of $14,000. The company's two stores have total sales of $250,000, contribution margin of 32 percent, and a total segment margin of $31,000. The contribution margin for the Orlando store must have been:

A. $65,000
B. $170,000
C. $105,000
D. $45,000

Answer 1

D. $45,000

Step-by-step explanation:

The computation of the contribution margin for the Orlando store is

= Total sales × contribution margin percentage - Gainesville sales × contribution margin percentage

= $250,000 × 32% - $100,000 × 35%

= $80,000 - $35,000

= $45,000

Contribution margin is come from deducting Gainesville contribution margin from the total contribution margin