Question

Boersma Sales, Inc., a merchandising company, reported sales of 7,100 units in September at a selling price of $682 per unit. Cost of goods sold, which is a variable cost, was $317 per unit. Variable selling expenses were $44 per unit and variable administrative expenses were $22 per unit. The total fixed selling expenses were $157,200 and the total administrative expenses were $338,000 The contribution margin for September was: Multiple Choice $3,878,400 $2,122,900 $2,591,500 $1,627,700

Answer 1

Answer: $2,122,900

Explanation:

In calculating the Contribution Margin for a good we take the Variable Expenses and subtract it from the Sales Price. The amount left is known as the Contribution Margin.

In the above question, the variable expenses are,

-Cost of goods sold of $317 per unit.

- Variable selling expenses of $44 per unit.

- Variable administrative expenses of $22 per unit.

There were reported sales of 7,100 units so the Variable costs are,

= (317 * 7,100) + (44*7,100) + (22*7,100)

= 2,250,700 + 312,400 + 156,200

= $2,719,300

Now subtracting the Variable costs from Sales we have,

= (682 * 7,100) - 2,719,300

= $2,122,900

The Contribution Margin is $2,122,900 so option 2 is correct.