Question

The following information is provided for Southall Company: Sales revenue $292,000 Variable manufacturing costs 99,000 Fixed manufacturing costs 61,000 Variable selling and administrative costs 44,000 Fixed selling and administrative costs 39,000 What is this company's contribution margin?

Answer 1

Answer:

contribution margin  149,000

contribution margin ratio 73.76%

Explanation:

$Sales \: Revenue - Variable \: Cost = Contribution \: Margin$

sales revenue          292,000

variable cost               99,000

variable selling           44,000

contribution margin  149,000

The variable S&A cost are part of the variable cost, so they are deducted from the sales revenue to obtain the contribution margin

$\frac{Contribution \: Margin}{Sales \: Revenue} = Contribution \: Margin \: Ratio$

149,000/292,000 = .737624 = 73.76%