The contribution margin for Sam's Bookstore for the first quarter is $1,30,000
<h3>How to calculate the contribution margin?</h3>
Contribution Margin = Sales - COGS- Variable Selling Expenses- Variable Administrative Expenses
Number of Books Sold= Sales Reported/ Average Selling Price per Book
= $900,000/$60
= 15,000 books
Total Variable Selling Expenses= Number of Books x Selling Expense per unit
= 15,000 books x $6 per book
= $90,000
Total Variable Administrative Expenses= Reported Sales x sales %
= $900,000 x 5%
= $45,000
Contribution Margin= Sales - COGS - Variable Selling Expenses- Variable Administrative Expenses
= $9,00,000 - $6,35,000 - $90,000 - $45,000
= $1,30,000
Thus, the contribution margin for Sam's Bookstore for the first quarter is $1,30,000
<h3>What is a contribution margin?</h3>
- We can present the contribution margin as a gross or per-unit figure.
- After deducting the variable portion of the company's costs, it represents the additional revenue made for each product or unit sold.
- By subtracting the variable cost per unit from the selling price per unit, the contribution margin is calculated.
- The measure, which is also referred to as dollar contribution per unit, shows how much a specific product contributes to the company's overall profit.
- It offers a means of illustrating the profit potential of a specific good or service a business offers, as well as the percentage of sales that goes toward paying the business' fixed expenses.
- Profit is defined as any revenue that remains after covering fixed costs.
The complete question is:
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= $9,00,000 , Cost of goods sold= $6,35,000 ,
Gross margin= $2,65,000
Selling and administrative expenses:
Selling= $1,01,000 , Administration= $1,06,000 ,
Net operating income= $58,000.
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?
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