In its first year of operations, a company has sales of $162,000, ending finished goods inventory of $9,000, variable manufacturing costs of $55,000, and fixed manufacturing costs of $32,000 for the year. The company pays 12% commission to its sales force and has fixed selling and administrative expenses of $25,000 annually. The company has no other variable expenses.
Assuming the company uses direct costing, the contribution margin for the year is
A)$96,560.
B)$87,560.
C)$71,560.
D)$107,000.

Question

Quizplus · Accepted Answer

Contribution Margin = Sales - Variable Costs= $162,000 - ($55,000 + 0.12 * $162,000)= $162,000 - $66,440= $96,560

In Its First Year of Operations, a Company Has Sales