Toby's Farm Store buys portable generators for $500 and sells them for $800.He pays a sales commission of 5% of sales revenue to his sales staff.Toby pays $2,000 a month rent for his store,and also pays $1,800 a month to his staff in addition to the commissions.Toby sold 200 generators in June.
-If Toby prepares a contribution margin income statement for the month of June,what would be his contribution margin?
A)$268,000
B)$160,000
C)$52,000
D)$108,000

Question

Quizplus · Accepted Answer

First, let's calculate the revenue generated from the sale of 200 generators:
Revenue = 200 x $800 = $160,000

Next, let's calculate the cost of goods sold:
Cost of goods sold = 200 x $500 = $100,000

Now, let's calculate the total sales commission paid to sales staff:
Sales commission = 0.05 x $160,000 = $8,000

Next, let's calculate the total operating expenses (rent and salaries):
Total operating expenses = $2,000 + $1,800 = $3,800

Finally, we can calculate the contribution margin:
Contribution margin = Revenue - Cost of goods sold - Sales commission - Total operating expenses
Contribution margin = $160,000 - $100,000 - $8,000 - $3,800
Contribution margin = $48,200

Therefore, the correct answer is C) $52,000.

Toby's Farm Store Buys Portable Generators for $500 and Sells