Question

Davidson company has sales of $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expenses of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is davidson’s contribution margin?.

Answer 1

Davidson’s contribution margin for the sale of goods would be : $40,000

What is contribution margin?

Contribution margin is a business' sales revenue less its variable costs. The resulting contribution margin can be used to cover its fixed.

Contribution margin is computed as:

= Sales - Total variable cost(Variable cost of goods sold + Variable selling expenses + Variable administrative expenses)

= $100,000 - ($40,000 + $15,000 + $5,000)

= $100,000 - $60,000

= $40,000

Therefore, Davidson’s contribution margin for the sale of goods would be $40,000

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