Sand Inc., a company that produces and sells a single product, has provided its contribution format income statement for January.

Sales (4,300 units) $ 94,600

Variable expenses 47,300

Contribution margin 47,300

Fixed expenses 35,000

Net operating income $ 12,300

If the company sells 4,900 units, its total contribution margin should be closest to:

Multiple Choice

a. $71,000

b. $47,300

c. $53,900

d. $14,016

C.

Explanation:

Contibution margin means the selling price minus the variable cost incurred on the product. Is the ability of the firm to cover its variable cost with the revenue.

Contribution margin = Sales revenues - Variable expenses

Sales revenue per unit = $94,600 / 4,300 units

Sales revenue per unit = $22

Variable expenses per unit = $47,300 / 4,300 units

Variable expenses per unit = $11

Contribution margin (4,900 units) = Sales revenues (4,900 units) - Variable expenses (4,900 units)

Contribution margin (4,900 units) = ($22 * 4,900 units) - ($11 * 4,900 units)

Contribution margin (4,900 units) = $107,800 - $53,900

Contribution margin (4,900 units) = $53,900