Question

Bolka Corporation, a merchandising company, reported the following results for October - Sales Cost of goods sold (all variable) Total variable selling expense Total fixed selling expense Total variable administrative expense Total fixed administrative expense A ta ta ta ta ta $ 453,000 $ 169,700 21,400 17,600 10,700 32,100 The contribution margin for October is:

Answer 1

Contribution margin = Total sales revenue - Total variable cost

Cost of goods sold includes all the costs and expenses directly related to production of goods, fixed as well as variable costs. In this question it is specifically said that Cost of goods sold is full of variable cost. And Cost of goods sold excludes indirect cost such as selling and administrative expenses.

So in order to calculate contribution margin Cost of goods and other 2 variable costs are reduced from sales.

Contribution margin = 453,000-169,700-21400-10700

=$251,200

Statement showing calculation of Contribution Margin. Sales. $ 453,000 Less (169,400). Cestig goods sold Call variable) . To tal variable selling eapense . (21,400). (10,700). Total variable administrative enpense. Contribution. Margin. 251,200