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    Central Valley Company: Contribution Margin

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    AQ-3

    The Central Valley Company is a merchandising firm that sells a single product. The company's revenues and expenses for the last three months are given below:

    Central Valley 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
    Less cost of goods sold ...... $252,000 294,000 336,000
    Gross Margin ................... $378,000 441,000 504,000

    Less operating expenses:
    Expense A .............................56,000 63,500 71,000
    Expense B .............................70,000 70,000 70,000
    Expense C .............................143,000 161,750 180,500
    Expense D .............................9,000 9,000 9,000
    Expense E .............................42,000 42,000 42,000
    Total operating expenses 320,000 346,250 372,500
    Net income............................$58,000 $94,750 $131,500

    Required:

    a. Determine which expenses are mixed and, by use of the high-low method, separate each mixed expense into its variable and fixed components. State the cost formula for each mixed expense.

    b. Compute the company's total contribution margin for May.

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    https://brainmass.com/business/accounting/central-valley-company-contribution-margin-530632

    Solution Summary

    The attached MS Excel spreadsheet contains detailed instructions for determination of mixed expenses and contribution margin for the Central Valley Company, utilizing the high-low method of cost allocation.

    $2.19

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