Compute the Gross Margin and Contribution Margin
Not what you're looking for?
The following information has been provided by the Evans Retail Stores, Inc., for the first quarter of the year:
Sales $350,000
Variable selling expense 35,000
Fixed selling expenses 25,000
Cost of goods sold (variable) 160,000
Fixed administrative expenses 55,000
Variable administrative expenses 15,000
The gross margin of Evans Retail Stores, Inc. for the first quarter is:
A) $210,000.
B) $140,000.
C) $220,000.
D) $190,000.
The contribution margin of Evans Retail Stores, Inc. for the first quarter is:
A) $300,000.
B) $140,000.
C) $210,000.
D) $190,000.
The total contribution margin decreases if sales volume remains the same and:
A) fixed expenses increase.
B) fixed expenses decrease.
C) variable expense per unit increases.
D) variable expense per unit decreases.
Purchase this Solution
Solution Summary
This solution illustrates how to compute the gross margin and contribution, and discusses the effect of changes in fixed and unit variable costs on the contribution margin.
Solution Preview
The gross margin of Evans Retail Stores, Inc. for the first quarter is:
A) $210,000.
B) $140,000.
C) $220,000.
D) $190,000.
The gross margin, a measure under absorption accounting, is the excess of sales revenues over the cost of goods sold. In this case, the gross margin is:
Sales $350,000
Cost of goods sold (variable) 160,000
Gross margin 190,000 ($350,000-$160,000) Answer D
The contribution margin of Evans Retail ...
Purchase this Solution
Free BrainMass Quizzes
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.