Question

Stanley's Bicycles store buys bicycles on average for $600 and sells them on average for $750. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1,400 a month rent for his store, and also pays $3,000 a month to his staff in addition to the commissions. Stanley sold 200 bicycles in June. If Stanley prepares a contribution margin income statement for the month of June, what would be his contribution margin

Answer 1

Answer:

Stanley's Bicycles contribution margin is $7,500

Explanation:

Stanley's Bicycles Contribution Margin Income Statement for the month of June

Sales ($750 x 200)                                                       $150,000

Less Variable Costs :

Costs of Sales ($600 x 200)                  $120,000

Commissions ( $150,000 x 15 %)            $22,500    ($142,500)

Contribution                                                                     $7,500

Less Fixed Costs

Rent                                                             $1,400

Salaries                                                       $3,000       ($4,400)

Net Income                                                                       $3,100

Conclusion

Contribution Margin is Sales less Variable Costs. Therefore, Stanley's Bicycles contribution margin is $7,500