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 $ 840,000 Cost of goods sold 525,000 Gross margin 315,000 Selling and administrative expenses Selling $ 112,000 Administration 128,000 240,000 Net operating income $ 75,000 On average, a book sells for $60. Variable selling expenses are $6 per book with the remaining selling expenses being fixed. The variable administrative expenses are 5% of sales with the remainder being fixed. The contribution margin for Sam's Bookstore for the first quarter is:

Answer 1

Total contribution margin= $189,000

Step-by-step explanation:

Giving the following information:

Sales $ 840,000

Cost of goods sold $525,000

On average, a book sells for $60.

Variable selling expenses are $6 per book

Variable administrative expenses are 5% of sales

First, we need to calculate the number of units sold:

Units sold= 840,000/60= 14,000 units

The contribution margin is the result of deducting from sales of all variable components.

Sales= 840,000

COGS= (525,000)

Variable selling expense= 14,000*6= (84,000)

Variable administrative expense= (840,000*0.05)= (42,000)

Total contribution margin= 189,000