Question

Water company
Comparative Income Statement
For the Second Quarter
	April	May	June
Sales in units	4,500	5,250	6,000
Sales Revenue	$630,000	$735,000	$840,000
Cost of goods sold	$252,000	$294,000	$336,000
Gross margin	$378,000	$441,000	$504,000
Selling and administrative expenses:
Shipping expense	$56,000	$63,500	$71,000
Advertising expense	$70,000	$70,000	$70,000
Salaries and commisions	$143,000	$161,500	$180,500
Insurance expense	$9,000	$9,000	$9,000
Depreciation expense	$42,000	$42,000	$42,000
Total selling and administrative expense	$320,000	$346,250	$372,500
Net operating income	$58,000	$94,750	$131,500

Compute the company's total contribution margin for April.

Answer 1

Cost of goods sold is variable in nature.

other expenses has variable and fixed portion.

Variable cost	$             35
= (372500-320000)/(6000-4500)
Contribution for April is:

Sales in units	Apr
Sales Revenue	$630,000
Variable costs
Cost of goods sold	$252,000
other expenses - variable	$157,500
[4500 * 35]
Total variable costs	$409,500
Contribution	$220,500

Answer is $220,500

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