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3 November, 00:05

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

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Answers (1)
  1. 3 November, 00:53
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    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.
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