A business operated at 100% of capacity during its first month, with the following results: Sales (90 units): $90,000Production costs (100 units): Direct materials$40,000 Direct labor20,000 Variable factory overhead2,000 Fixed factory overhead7,00069,000Operating expenses: Variable operating expenses$8,000 Fixed operating expenses1,0009,000The amount of contribution margin that would be reported on the variable costing income statement isa.$34,200b.$29,700c.$20,200d.$26,200

The contribution margin is calculated as difference between sales and variable costs.

Answered: business operated at 100% of capacity…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 1PB: A company sells mulch by the cubic yard. Grade A much sells for $150 per cubic yard and has variable...

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A business operated at 100% of capacity during its first month, with the following results:

Sales (90 units):		$90,000
Production costs (100 units):
Direct materials	$40,000
Direct labor	20,000
Variable factory overhead	2,000
Fixed factory overhead	7,000	69,000
Operating expenses:
Variable operating expenses	$8,000
Fixed operating expenses	1,000	9,000

The amount of contribution margin that would be reported on the variable costing income statement is

a.$34,200

b.$29,700

c.$20,200

d.$26,200

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