**Problem: Contribution Margin Calculation for a Merchandising Company**Assume the following information for a merchandising company:- **Sales:** $500,000- **Variable Selling Expenses:** $25,000- **Cost of Goods Sold:** $350,000- **Fixed Administrative Expenses:** $50,000- **Fixed Selling Expenses:** $40,000- **Variable Administrative Expenses:** $5,000**Question:** What is the company's contribution margin?**Multiple Choice Options:**- $145,000- $125,000- $120,000- $150,000**Solution:**To calculate the contribution margin, use the formula:\[ \text{Contribution Margin} = \text{Sales} - (\text{Variable Costs} + \text{Cost of Goods Sold}) \]Where:- Variable Costs = Variable Selling Expenses + Variable Administrative Expenses**Calculations:**- Variable Costs = $25,000 + $5,000 = $30,000- Contribution Margin = $500,000 - ($30,000 + $350,000) - Contribution Margin = $500,000 - $380,000 = $120,000**Correct Answer:**- The company's contribution margin is $120,000.

Contribution margin = Sales - Total variable costs

Answered: Assume the following information for a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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