Atwood Dairy Bar sells its famous soft-serve ice cream cones near a marina and resort area. The owner, Theresa, wants to determine the cost behaviour patterns to help planning for the next summer season. She has the following information available about the operating costs and the number of soft-serve cones served.

Theresa uses the high-low method to determine the operating cost equation and sells 8,000 cones in a month for $2.00 each.
-What would the contribution margin be at Atwood Dairy Bar if the owner prepared a contribution margin income statement for that month?
A) $14,000
B) $16,000
C) $2,000
D) $18,000

Question

Atwood Dairy Bar sells its famous soft-serve ice cream cones near a marina and resort area. The owner, Theresa, wants to determine the cost behaviour patterns to help planning for the next summer season. She has the following information available about the operating costs and the number of soft-serve cones served.
  
Theresa uses the high-low method to determine the operating cost equation and sells 8,000 cones in a month for $2.00 each.
-What would the contribution margin be at Atwood Dairy Bar if the owner prepared a contribution margin income statement for that month?
A) $14,000 
B) $16,000 
C) $2,000 
D) $18,000

Quizplus · Accepted Answer

Contribution margin is sales minus variable costs. In this case, sales are $18,000 and variable costs are $4,000, so the contribution margin is $18,000 - $4,000 = $14,000.

Atwood Dairy Bar Sells Its Famous Soft-Serve Ice Cream Cones