Suppose Mallcentral sells 1,000,000 hardcover books a day at an average price of

Question

Suppose Mallcentral sells 1,000,000 hardcover books a day at an average price of $30. Assume that Mallcentral’s purchase price for the books is 75% of the selling price it charges retail customers. Mallcentral has no beginning inventory, but it wants to have a three-day supply of ending inventory. Assume that operating expenses are $1,000,000 per day.

8. What is Mallcentral’s budgeted contribution margin for a (seven-day) week?

9. What is Mallcentral’s budgeted gross profit for a (seven-day) week?

The Correct Answer for both is $52,500,000. I Don't understand how they get that answer. HELP????

Explanation / Answer

Formula for ccontribution margin and gross profit is same in this case which is

Sales-cost of good sold

7 day sales revenue =1000000×7×30=210000000

Cost of good sold=75%×210000000=157500000

Contribution margin or gross profit

=210000000 -1575500000

=$52500000

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