An income statement for Sam's Bookstore for the first quarter of the year is presented below: On average, a book sells for $50. 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.
If 20,000 books are sold during the second quarter and this activity is within the relevant range, the company's expected contribution margin would be:
A) $300,000
B) $160,000
C) $860,000
D) $58,000

Question

An income statement for Sam's Bookstore for the first quarter of the year is presented below:  On average, a book sells for $50. 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.
If 20,000 books are sold during the second quarter and this activity is within the relevant range, the company's expected contribution margin would be:
A) $300,000 
B) $160,000 
C) $860,000 
D) $58,000

Quizplus · Accepted Answer

Unit sales = $900,000 ÷ $50 per book = 18,000 books
Unit cost of goods sold = $630,000 ÷ 18,000 books = $35 per book
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An Income Statement for Sam's Bookstore for the First Quarter