Question

An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's Bookstore Income Statement For Quarter Ended March 31 Sales $ 880,000 Cost of goods sold 550,000 Gross margin 330,000 Selling and administrative expenses Selling $117,000 Administration 138,000 255,000 Net operating income $ 75,000 On average, a book sells for $55. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed. The contribution margin for Sam's Bookstore for the first quarter is:

Answer 1

Answer
Sales revenue		$      880,000
Less: Variable costs
Cost of goods sold	$        550,000
Variable selling expenses ( 880000/55)*5	$          80,000
Variable administrative expenses (880000*4%)	$          35,200
Total variable expenses		$      665,200
Contribution margin		$      214,800

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