Question

Sales were $500,000. The variable cost of goods sold was $300,000. The variable selling and administrative expenses were $75,000. Fixed costs were $60,000. Using variable costing, what is the contribution margin?
A) $65,000
B) undeterminable with given information
C) $200,000
D) $125,000

Answer 1

Answer:

D) $125,000

Explanation:

The computation of the contribution margin is shown below:

= Sales revenue -  variable cost of goods sold  - variable selling and administrative expenses

= $500,000 - $300,000 - $75,000

= $125,000

The fixed cost expense should not be considered under the variable costing method, so ignored it.

Simply the contribution margin = Total revenues - total variable cost

Hence, the correct option is D.