Question

At a sales level of $300,000, James Company's gross margin is $15,000 less than its contribution margin, its net operating income is $50,000, and its selling and administrative expenses total $120,000. At this sales level, its contribution margin would be:

Answer 1

Answer:

$185,000

Explanation:

Jame's company gross margin is $15,000 less than its contribution margin at a sales level of $300,000

It's net operating income is $50,000

Selling and administrative expenses is $120,000

The first step is to calculate the gross margin

= net operating income + selling and administrative expenses

= $50,000 + $120,000

= $170,000

Therefore, since the gross margin at the sales level is $15,000 less then the contribution margin can be calculated as follows

= $170,000 + $15,000

= $185,000

Hence the contribution margin at this sale level is $185,000