Question

Bolka Corporation, a merchandising company, reported the following results for October: Sales $ 4,096,400 Cost of goods sold (all variable) $ 2,194,500 Total variable selling expense $ 238,700 Total fixed selling expense $ 144,700 Total variable administrative expense $ 238,700 Total fixed administrative expense $ 282,900 The contribution margin for October is:

Answer 1

The contribution margin for October should be considered as the $1,424,500.

Calculation of the contribution margin:

Contribution margin = Sales - Cost of goods sold + Total variable selling expense + Total variable administrative expense

= $4,096,400- $2,194,500 + $238,700 + $238,700

= $4,096,400 - $2,671,900
=  $1,424,500

Therefore for computing the contribution margin we simply applied the above formula and we have not consider the Total fixed administrative expense as its a fixed expenses.

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