Question

An income statement for Alexander's Bookstore for the second quarter of the year is presented below: Alexander's Bookstore Income Statement For Quarter Ended June 30 Sales $ 1,000,000 Cost of goods sold 665,000 Gross margin 335,000 Selling and administrative expenses Selling $ 107,000 Administration 118,000 225,000 Net operating income $ 110,000 On average, a book sells for $50. Variable selling expenses are $4 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed. The contribution margin for Alexander's Bookstore for the second quarter is:

Answer 1

Answer:

Contribution margin= $225,000

Explanation:

Giving the following information:

Sales $ 1,000,000

Cost of goods sold 665,000

On average, a book sells for $50.

Variable selling expenses are $4 per book

The variable administrative expenses are 3% of sales

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

Units sold= 1,000,000/50= 20,000 units

Now, the total contribution margin:

Sales=  1,000,000

Cost of goods sold= (665,000)

Variable selling expenses= 4*20,000= (80,000)

Variable administrative expenses= (1,000,000*0.03)= 30,000

Contribution margin= $225,000