Spartan Systems reported total sales of $300,000, at a price of $20 and per unit variable expenses of $12, for the sales of their single product. What is the amount of contribution margin if sales volume increases by 30%?
A)$19,500
B)$15,000
C)$156,000
D)$120,000

Question

Spartan Systems reported total sales of $300,000, at a price of $20 and per unit variable expenses of $12, for the sales of their single product.  What is the amount of contribution margin if sales volume increases by 30%?
A)$19,500 
B)$15,000 
C)$156,000 
D)$120,000

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit:

Contribution margin = Price per unit - Variable expenses per unit 
Contribution margin = $20 - $12 
Contribution margin = $8

Then, we can calculate the total contribution margin with the current sales volume: 
Total contribution margin = Contribution margin per unit x Sales volume 
Total contribution margin = $8 x (300,000/20) 
Total contribution margin = $8 x 15,000 
Total contribution margin = $120,000

If sales volume increases by 30%, the new sales volume would be: 
New sales volume = 300,000 x 1.3 
New sales volume = 390,000

Then, we can calculate the new total contribution margin: 
New total contribution margin = Contribution margin per unit x New sales volume 
New total contribution margin = $8 x (390,000/20) 
New total contribution margin = $8 x 19,500 
New total contribution margin = $156,000

Therefore, the amount of contribution margin if sales volume increases by 30% is $156,000 (choice C).

Spartan Systems Reported Total Sales of $300,000, at a Price