Question

Hinge manufacturing's cost of goods sold is $420000 variable and $240000 fixed. the company's selling and administrative expenses are $300000 variable and $360000 fixed. if the company's sales is $1580000, what is its contribution margin

Answer 1

$860,000

Step-by-step explanation:

contribution margin = total sales - total variable costs

• total sales = $1,580,000
• total variable costs = $420,000 + $300,000 = $720,000

contribution margin = $1,580,000 - $720,000 = $860,000

The contribution margin is basically the difference between sales revenue and the variable costs associated to the production and sale of the goods. The contribution margin is used to pay fixed costs and after break even point is reached, it increases profits.

Answer 2

Contribution Margin $ 920,000 Absorption Costing

Contribution Margin $ 860,000 Variable Costing

Step-by-step explanation:

Hinge Manufacturing

Absorption Costing

Sales $1580000

Cost of Goods sold

Less Variable Costs $420000

Manufacturing Margin $1160,000

Less Fixed Costs $240000

Selling and Administrative expenses

Variable $300,000

Fixed $360,000

Net Income $ 260,000

Hinge Manufacturing

Variable Costing

Sales $1580000

Cost of Goods sold

Less Variable Costs $420,000

Selling and Administrative expenses Variable $300,000

Contribution Margin $ 860,000

Less Fixed Costs $240000

Selling and Administrative expenses Fixed $360,000

Net Income $ 260,000