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: Sam's Bookstore Income Statement For Quarter Ended March 31 Sales Cost of goods sold Gross margin Selling and administrative expenses $930,000 655,000 275,000 Selling Administration $105,000 114,000 219,000 $ 56,000 Net operating income On average, a book sells for $60. 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:

Explanation / Answer

Contribution margin : Contribution margin=sales-variable expenses Number of books sold (930000/60) 15500 Gross margin 275000 Less: Expenses Variable selling expenses (15500*5) 77500 Variable administrative expenses (930000*4%) 37200 114700 Contribution margin 160300 Answer is $160300

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