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 $ 880,000 Cost of goods sold 550,000 Gross margin 330,000 Selling and administrative expenses Selling $ 117,000 Administration 138,000 255,000 Net operating income $ 75,000 On average, a book sells for $55. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed. The contribution margin for Sam's Bookstore for the first quarter is: Multiple Choice $665,200 $214,800 $250,000 $764,800

Answer 1

Answer:

Contribution= $214,800

Explanation:

Contribution margin ratio is the proportion of sales revenue that is earned as contribution.

Unit sold = revenue / selling price = 880,000/55 = 16,000  units

Contribution = Sales revenue - variable cost

Variable  admin = 4% × 880,000= 35200

Variable selling = 5× 16,000 = 80,000

Contribution = Sales revenue - cost of goods sold - admin - selling

= 880,000 - 550,000- 35200 - 80,000=214,800

Contribution= $214,800