Question

Company XYZ is a merchandising business. The company is specialized in selling a specific brand of smartphones. The purchase cost per unit was OMR310. At the beginning of the month of May the company has inventory of 1,260 smartphones. During the month of May, the company purchased additional 1,000 smartphones. By the end of May, the company had 440 smartphones remaining in the store. The selling and general expenses for the company include wages and commissions, which include fixed monthly payment of OMR1,600 plus a OMR9 per unit sold; and depreciation of OMR2,000 per month. Assuming a selling price per unit of OMR620, calculate the total contribution margin. Select one:

a. None of the given answers

b. OMR547,820

c. OMR564,200

d. OMR544,220

e. OMR379,260

Answer 1

Purchase Price - OMR 310 / unit

Selling Price - OMR 620/ unit

Opening Stock - 1260 units

Purchases - 1000 units

Closing Stock - 440 units

Therefore Sales = 1260 + 1000 - 440 = 1820 units

Monthly payment OMR 1600 ( Fixed )

Depreciation OMR 2000 ( Fixed )

Other expenses OMR 9 / unit ( Variable )

Therefore expenses = OMR 9 × 1820 units = OMR 16,380

Sale Value = OMR 620 × 1820 units sold = OMR 1128400

Purchase Value of = OMR 310 × 1820 units phones sold = OMR 564200

Contribution Margin = Net Sales - Variable Costs =1128400-(564200+16380) = 547820

Therefore the correct answer is (b) OMR 547820