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The Rhythm Shop is a large retailer of acoustic, electric, and bass guitars. An income statement for the companys acoustic g2. What was the contribution toward fixed expenses and profits from each guitar sold during the quarter? (State this figure i

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Answer #1

1

Contribution margin Income statement

Particulars Amount ($) Amount ($)
Sales 1600000
Variable expenses:
Cost of goods sold 800000
selling expenses
[($1600000 / $800) X $75]
150000
Administrative expenses
($200000 X 25%)
50000 1000000
Contribution margin 600000
Fixed expenses:
selling expenses
($400000 - $150000)
250000
Administrative expenses
($200000 X 75%)
150000 400000
Operating Income 200000

2

Contribution margin per guitar = (Contribution margin / number of guitars sold)
=> [$600000 / ($1600000 / $800)]
=> ($600000 / 2000 guitars)
=> $300 per guitar

3

Contribution margin increase by = (Contribution margin per guitar X additional guitars sold)
=> ($300 X 100 guitars)
=> $30000

(If there are any questions, kindly let me know in comments. If the solution is to your satisfaction, a thumbs up would be appreciated. Thank you)

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