An income statement for Sams Bookstore for the first quarter

An income statement for Sam\'s Bookstore for the first quarter of the year is presented below: Sam\'s Bookstore Income Statement For Quarter Ended March 31 Sales Cost of goods sold Gross margin Selling and administrative expenses $930,000 655,000 275,000 Selling Administration $105,000 114,000 219,000 $ 56,000 Net operating income On average, a book sells for $60. 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 The contribution margin for Sam\'s Bookstore for the first quarter is:

Solution

Contribution margin : Contribution margin=sales-variable expenses Number of books sold (930000/60) 15500 Gross margin 275000 Less: Expenses Variable selling expenses (15500*5) 77500 Variable administrative expenses (930000*4%) 37200 114700 Contribution margin 160300 Answer is $160300