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30 July, 00:39

Iaci Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $133.60 per unit. Sales volume (units) 4,000 5,000 Cost of sales $ 383,600 $ 479,500 Selling and administrative costs $ 124,400 $ 136,000 The best estimate of the total contribution margin when 4,300 units are sold is:

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  1. 30 July, 04:13
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    Contribution margin = $162,110

    Explanation:

    Giving the following information:

    Selling price = $133.6

    Total variable cost (4,000 units) = $383,600

    Unitary variable cost = 383,600/4,000 = $95.9

    Total variable cost (5,000 units) = 479,500

    Unitary variable cost = 479,500/5,000 = $95.9

    The contribution margin is calculated using the following formula:

    Contribution margin = sales - total variable cost

    Contribution margin = 4,300*133.6 - 4,300*95.9

    Contribution margin = $162,110
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