An income statement for Sam\'s Bookstore for the first quarter of the year is pr

Question

An income statement for Sam's Bookstore for the first quarter of the year is presented below:

On average, a book sells for $70. 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:

Sam's Bookstore Income Statement For Quarter Ended March 31 Sales $ 840,000 Cost of goods sold 520,000 Gross margin 320,000 Selling and administrative expenses Selling $ 111,000 Administration 126,000 237,000 Net operating income $ 83,000

Explanation / Answer

answer

contribution margin:

contribution margin=sales-variable expenses

number of books sold = 840000/70

= 12000

gross margin = 320000

less: expenses

variable selling expenses = (12000*5) 60000

variable administrative expenses = 840000*4%

= 33600

contribution margin = 226400

answer = 226400

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