Question

The following information is available for Wade Corp.: Sales $580,000 Total fixed expenses $150,000 Cost of goods sold 390,000 Total variable expenses 360,000 A CVP income statement would report Select one: a. gross profit of $190,000. b. contribution margin of $430,000. c. gross profit of $220,000. d. contribution margin of $220,000.

Answer 1

Answer:

Contribution margin = Total sales - Total variable cost

                                 = $580,000 - $360,000

                                 = $220,000

A CVP income statement would report contribution margin of $220,000

The correct answer is D

Explanation:

CVP income statement usually separate variable cost from fixed cost. In this case, there is need to determine contribution margin, which is the excess of total sales over total variable cost.

Answer 2

A CVP income statement would report Select one:$220,000. d. contribution margin of $220,000.

Contribution margin

Using this formula

Contribution margin = Sales - Variable cost

Where:

Sales=$580,000

Variable cost=$360,000

Let plug in the formula

Contribution margin= $580,000 - $360,000

Contribution margin=$220,000

Therefore, CVP income statement would report contribution margin of $220,000.

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